fx

Posted on Nov 24, 2020 by Kris Longmore
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I'm a big fan of Ernie Chan's quant trading books: Quantitative Trading, Algorithmic Trading, and Machine Trading. There are some great insights in there, but the thing I like most is the simple but thorough treatment of various edges and the quant tools you might use to research and trade them. Ernie explicitly states that the examples in the books won't be tradable, but they've certainly provided fertile ground for ideas. In Machine Trading, there is an FX strategy based on an autoregressive model of intraday price data. It has a remarkably attractive pre-cost equity curve, and since I am attracted to shiny objects, I thought I'd take a closer look. Autoregressive Models 101 An autoregressive (AR) model is a time-series multiple regression where: the predictors are past values of the time series the target is the next realisation of the time series If we used a single prior value as the only predictor, the AR model would be called an [latex]AR(1)[/latex] and it would look like: [latex] y_t = \beta_0 + \beta_1 y_{t-1} + \epsilon_t [/latex] (the [latex]\beta[/latex]'s are...

Posted on Jun 01, 2020 by Kris Longmore
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Anyone that's been around the markets knows that the monthly release of the United States Department of Labor's Non-Farm Payrolls (NFP) data can have a tremendous impact, especially in the short term. NFP is a snapshot of the state of the employment situation in the US, representing the total number of paid workers, excluding farm employees and public servants. We know your barn is hiding a giant mining station, Rick The release of the monthly NFP data typically causes large swings in the currency markets, even when the results are in line with estimates. Here, we are interested in exploring potential seasonal effects around the release of this data. For example, does price tend to drift prior to the release? If so, which way?   For this analysis, we'll explore the EUR/USD exchange rate. To set up this research problem, we need to know that NFP is released on the first Friday of the month at 8:30am ET - usually. If the first Friday is a holiday, NFP is released the following Friday. These sorts of details can make seasonal analysis...

Posted on May 31, 2019 by Kris Longmore
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If you've ever delved into the world of retail foreign exchange trading, you'll have come across the MetaTrader platform. Let's be clear. The platform has its drawbacks. If you've traded "grown-up" markets, some of the features will leave you scratching your head. But one thing's for sure - MetaTrader provides fast, convenient access to pretty much every retail forex broker on the planet. That's no small thing. If we had the choice, we'd rather trade directly with the broker through a dedicated API rather than through a third-party platform, but often that's not an option. One thing that my life as a trader has taught me is that it's better to move fast in order to get trading strategies into the market with a solution that's "good enough" rather than spending valuable R&D time on developing "optimal" solutions - which usually end up changing anyway. So we suck it up and make the best of the tools at our disposal. It's all about being smart with priorities. We do our Spot FX trading through Darwinex. Not only is their business...

Posted on Jul 10, 2018 by Kris Longmore
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One of the ongoing research projects inside the Robot Wealth community involves an FX strategy with some multi-week hold periods. Such a strategy can be significantly impacted by the swap, or the cost of financing the position. These costs change over time, and we decided that for the sake of more accurate simulations, we would incorporate these changes into our backtests. This post shows you how to simulate variable FX swaps in both Python and the Zorro trading automation software platform. What is Swap? The swap (also called the roll) is the cost of financing an FX position. It is typically derived from the central bank interest rate differential of the two currencies in the exchange rate being traded, plus some additional fee for your broker. Most brokers apply it on a daily basis, and typically apply three times the regular amount on a Wednesday to account for the weekend. Swap can be both credited to and debited from a trader's account, depending on the actual position taken. Why is it Important? Swap can have a big impact on strategies...