Algorithmic trading
Software follows a defined procedure.
In a fixed-rule strategy, people specify the checks beforehand. The program applies them to each new observation, including when the answer is “do nothing.”
For example, a rule could…
- Follow a trend. Compare recent prices with a longer average; consider buying when the required checks agree.
- Wait for a recovery. Observe a dip, then require improving prices before entering.
- Limit a position. Request an exit when a price or time limit is reached. The eventual sale price can still be worse.
Automation makes a rule repeatable. It doesn’t make the idea correct.
