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Algo Trading 101
Algorithmic Trading Strategies, Explained
Almost every algorithmic strategy is a variation on a handful of core ideas. Learn the families and you can classify anything you come across.
NoVo Options Trading · 2026
You could spend years reading strategy names, but nearly all of them are variations on five core ideas. Here they are, with the one condition each needs to work.
Trend following
Buy strength, sell weakness, ride the move. It wins in trending markets and bleeds in choppy ones — the classic “death by a thousand cuts” in a range. Needs: a real trend (momentum vs mean reversion).
Mean reversion
The opposite bet: price stretched too far from its average tends to snap back. It wins in ranges and gets run over in strong trends. Needs: a range-bound, non-trending regime.
Breakout
Enter when price breaks a key level (a range, an opening range, a prior high) expecting continuation. Wins on real breakouts, loses on false ones — so confirmation matters (the opening range).
There's no best strategy — only the right strategy for the current regime. The edge is knowing which environment you're in, not which system you prefer.
Momentum and market making
Momentum rides assets already moving hard, betting the move persists short-term. Market making profits from the bid-ask spread by providing liquidity — high-frequency, infrastructure-heavy, and mostly an institutional game (high-frequency trading, what market makers do). Whichever family you pick, sizing and risk rules matter more than the entry (position sizing).
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NoVo is a software tool for market analysis and for executing trades you initiate, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.