I am trying to test a strategy but do not know if I should use daily or weekly data? I have tried researching this & have found that daily data will bring " too much " noise compared to lower frequencies. Specifically, I am trying to "backtest" using a 6-month look back period. If I use daily data I will have approximately 125 observations versus 26 if I use weekly. Will I suffer from "too much" noise or lack thereof if I use weekly?
If you need for backtesting a trading strategy for a 6-month look back period you will have to use intraday data, in order to be able to get more significative estimates.
26 observations are not enough to implement a backetesting model and, generally, larger and larger number of observations leads to increase the accuracy and precision of your estimates. Look here for a simple explanation of that.
Secondly, increasing the number of observations reduces the sample noise and not increases that ones because of the same reasons explained in that link I posted above.
A solution could be use intraday data to increase the sample or setting your trading strategy on more long term.