During the previous chapters, we used statistical methods to predict market price movement from historical data. You may think that you know how to manipulate data, but how can these statistical techniques be applied to real trading? After spending so much time working on data, you may also want to know some key trading strategies that you can apply to make money.

In this chapter, we will talk about basic algorithmic strategies that follow human intuition. We will learn how to create trading strategies based on momentum and trend following, and a strategy that works for markets with mean reversion behavior. We will also talk about their advantages and disadvantages. By the end of this chapter, you will know how to use an idea to create a basic trading strategy.

This chapter will cover the following topics:

• Creating a trading strategy based on momentum and trend following
• Creating a trading strategy that works for markets with mean reversion behavior
• Creating trading strategies that operate on linearly correlated groups of trading instruments