Systematic Approach

A systematic approach allows us to establish a set of rules and guidelines for entering and exiting trades. By following a predefined strategy, we can maintain consistency in our decision-making process.

Objective Decision Making.

By relying on predetermined rules and parameters, we are eliminating subjective judgments and emotional biases. This objective approach enhances discipline and helps us stick to our strategies even during challenging market conditions.

Efficiency And Scalability.

Our systematic decision-making is automated using algorithmic trading systems. Once a strategy concept is developed and validated, we programme it to automatically execute trades , reducing the need for manual intervention. This automation improves trade execution speed, minimizes delays, and allows us to simultaneously capture opportunities across multiple currencies . With this approach we can easily handle larger trading volumes or diversify portfolios even more to include additional markets or instruments.

Why we started from currencies.

Compared to other financial markets, the currency market is renowned for its high stability. Currencies are influenced by various economic, political, and social factors, providing a diverse range of opportunities. Additionally, central banks actively monitor and intervene in the currency market to maintain stability, reducing the likelihood of extreme volatility.

High Liquidity.

In the currency market, participants can enter or exit positions swiftly due to the vast number of buyers and sellers operating 24 hours a day, five days a week. This high liquidity ensures that traders can execute their trades promptly and at competitive prices, minimizing the risk of slippage.

Gaps.

One of the unique features of the currency market is its continuous operation. Unlike other markets that have opening and closing hours, the currency market operates around the clock, except for weekends. This continuous nature ensures that there are no/low gaps in price action when the market reopens, most of the time, reducing the risk of significant price jumps.

Low Correlation.

Currency markets often exhibit low correlation with traditional asset classes such as stocks and bonds. Incorporating a systematic market-neutral strategy on the currency market, can provide diversification benefits to an investment portfolio. When traditional asset classes experience downturns, currency strategies can potentially act as a hedge and provide uncorrelated returns. This diversification can help reduce portfolio risk and enhance risk-adjusted returns.

Using Market-Neutral Strategies.

A market-neutral strategy aims to generate returns by exploiting relative price movements between different currencies while minimizing exposure to overall market direction. It involves simultaneously taking long and short positions in different currency pairs to offset market risk and focus on capturing relative value opportunities. This lead to smoothed returns, caused by stability in the equity line over a long term horizon. By adopting this approach, the strategies aim to generate consistent returns regardless of the overall direction and fluctuations of the market.

Risk Measures w/ Darwinex.

Managing risk is crucial for long-term success. By implementing a systematic approach to risk management, investors can effectively measure and mitigate potential risks. To ensure security and stability, we use Value at Risk (VaR). It quantifies the potential loss of an investment portfolio over a specific time horizon and at a given confidence level. By incorporating VaR into a systematic approach, we can gain a clearer understanding of the potential downside risk associated with our strategies. It also captures the potential for extreme events or tail risks.