Identifying types of trading philosophies - I

Hello and welcome to Financial Trading in R! This course will teach you how to construct a basic trading strategy in quantstrat, R's industrial-strength backtesting platform developed by Brian Peterson, Director of Algorithmic Trading at DV Trading. Over the next few chapters, you'll build a trading strategy in quantstrat from start to finish, including the code to set up a new strategy, as well as the design of indicators, signals, and rules for your strategy. By the end of the course, you'll be ready to design and implement your own trading strategies directly in R!

quantstrat is currently only available on GitHub. If you want to install it on your own machine, you first need to remotes package.

install.packages("remotes")

Then you can install quantstrat using

remotes::install_github("braverock/quantstrat")

Before getting into the meat and potatoes of the course, let's review some phrases and mechanics you may have heard in the world of financial trading, or even in pop culture. As you learned in the video, the mechanics of trading usually come in one of two forms:

• Trend trading (also divergence or momentum), which is a bet that a quantity, such as a price, will keep moving in its current direction.
• Reversion trading (also convergence, cycle, or oscillation), which is a bet that a quantity, such as a price, will reverse.

When someone says "the trend is your friend", which type of trading philosophy is he or she referring to?