26) Advanced Techniques to Categorize Trading Market Regimes | Algo Trading

It's important to categorize the Market Regime because the price action will exhibit different characteristics in each regime. And if the price action characteristics change, then it becomes advantageous for algorithmic trading rules to change, or adapt to that regime.

If identical trading rules are used for all regimes, then we risk our algorithm losing valuable edge, with the probabilities moving against us. However, this technique does require careful consideration of statistical significance to avoid over-fitting, which is also explained in the video.

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Content Disclaimer: The contents of this video (and all other videos by the presenter) are for educational purposes only, and are not to be construed as financial and/or investment advice.