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Topic Title: Currency Trading Strategies
Created On Wed Aug 22, 07 05:21 PM

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arsenalboi
Member

Posts: 75
Joined: Jul 2007

Wed Aug 22, 07 05:21 PM

Does anyone know where I could find information of current currency traded models?

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pb273
Senior Member

Posts: 646
Joined: Jul 2002

Wed Aug 22, 07 07:14 PM

ha! ha! ha! are u serious? why would anyone share their models with you!!

jokes apart, some of the models have really been institutionalized into readily available products. In fact, you can actually now buy a ETF on one popular model - the currency carry trade. (although off late it has taken some beating).

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arsenalboi
Member

Posts: 75
Joined: Jul 2007

Thu Aug 23, 07 09:16 AM

Well it was worth a try

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yabbadabba
Senior Member

Posts: 261
Joined: Jul 2006

Sun Sep 30, 07 01:47 AM

Tons of research out there, although FX is not so widely covered in QF as Equity and FI.
185,000 hits with google scholar: http://scholar.google.com/scholar?q=%22foreign+exchange%22&hl=en&lr=&start=10&sa=N

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"Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world.�

Keynes, The General Theory of Employment, Interest and Money

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acastaldo
Senior Member

Posts: 355
Joined: Oct 2002

Sun Sep 30, 07 09:57 PM

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you can actually now buy an ETF on one popular model - the currency carry trade.

You are referring to Deutsche Bank's DBV ETF

The methodology for this strategy is fully disclosed, and worth reading. We shall see if it continues profitable or if, as you suugest, it stops working now that it is too well known.

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AvatarPh
Junior Member

Posts: 14
Joined: Jul 2007

Mon Oct 01, 07 04:27 AM

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Originally posted by: acastaldo
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you can actually now buy an ETF on one popular model - the currency carry trade.

You are referring to Deutsche Bank's DBV ETF

The methodology for this strategy is fully disclosed, and worth reading. We shall see if it continues profitable or if, as you suugest, it stops working now that it is too well known.

Everybody in the market knows how to do it. Even mum and dad investors....

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pb273
Senior Member

Posts: 646
Joined: Jul 2002

Tue Oct 02, 07 08:57 PM

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Originally posted by: acastaldo

We shall see if it continues profitable or if, as you suugest, it stops working now that it is too well known.

No man, I am not suggesting anything. Not everything stops working even if they get too well known. Some things like French-Fama Value-Growth factor has been known since ages and still works - only thing that has changed is that it works with a much high volatility now i.e. the % of months profitable has gone down and the magnitudes of drawdowns has increased.

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acastaldo
Senior Member

Posts: 355
Joined: Oct 2002

Fri Oct 05, 07 02:43 AM

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Originally posted by: pb273 No man, I am not suggesting anything..

My comment was not addressed to you but to avatarPh

Edited: Fri Oct 05, 07 at 03:39 AM by acastaldo

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farmer
Senior Member

Posts: 7232
Joined: Dec 2002

Fri Oct 05, 07 08:03 PM

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Originally posted by: pb273
currency... French-Fama Value-Growth factor

Probably the performance difference is economies of scale.

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Unemployment peaked at 9% two months after the October 1929 crash and then began drifting down over the next six months, falling to 6.3% by June 1930. In June 1930, against the advice of 1000 economists who took out newspaper ads warning against it, the US raised tariffs in order to save jobs by reducing imported goods.

Edited: Fri Oct 05, 07 at 08:03 PM by farmer

Posts: 97
Joined: Jul 2002

Tue Oct 23, 07 06:48 PM

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Originally posted by: farmer
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Originally posted by: pb273
currency... French-Fama Value-Growth factor

Probably the performance difference is economies of scale.

Not necessarily. Larger volume means larger slippage (or realised transaction cost). However, lots of successful fund managers succeed due to good risk management, not unique trading startegies.

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dexi
Junior Member

Posts: 11
Joined: Oct 2007

Tue Oct 30, 07 09:02 PM

Quote
Originally posted by: arsenalboi
Does anyone know where I could find information of current currency traded models?

Hi
Did you try Pivot Point System from Peter Bain-professional currency trader, this system give opportunity to make 250-300 pip/week...

Edited: Tue Oct 30, 07 at 09:03 PM by dexi

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bhamadicharef
Member

Posts: 68
Joined: Sep 2007

Wed Dec 12, 07 04:48 PM

What about triangular arbitrage ?

A microscopic model of triangular arbitrage
Yukihiro Aiba and Naomichi Hatano
Physica A: Statistical and Theoretical Physics, Volume 371, Issue 2, 15 November 2006, Pages 572-584

Triangular arbitrage in the foreign exchange market
Yukihiro Aiba and Naomichi Hatano
Physica A: Statistical Mechanics and its Applications, Volume 344, Issues 1-2, 1 December 2004, Pages 174-177

Triangular arbitrage and negative auto-correlation of foreign exchange rates
Yukihiro Aiba, Naomichi Hatano, Hideki Takayasu, Kouhei Marumo and Tokiko Shimizu
Physica A: Statistical Mechanics and its Applications, Volume 324, Issues 1-2, 1 June 2003, Pages 253-257

Triangular arbitrage as an interaction among foreign exchange rates
Yukihiro Aiba, Naomichi Hatano, Hideki Takayasu, Kouhei Marumo and Tokiko Shimizu
Physica A: Statistical Mechanics and its Applications, Volume 310, Issues 3-4, 15 July 2002, Pages 467-479

BHC

Posts: 164
Joined: Mar 2005

Fri Dec 14, 07 03:05 PM

Triarb in practice is not as easy. Banks will complain if you arb them and will start rejecting your orders. They have some radars in place to look for clients who pick them up too often. Besides that, you have to have acces to good relationships, very tight interbank spreads and very fast execution speeds to make it work.

Edited: Fri Dec 14, 07 at 03:09 PM by quantumar

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fars1d3s
Senior Member

Posts: 452
Joined: Aug 2004

Sat Dec 15, 07 12:48 AM

A lot of bank traders use a tactic called "stop-hunting" where they move the markets toward levels where lots of stops are concentrated, executing them, and then letting the markets move back so they can book the profits. Do you think this ethical ?

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bhamadicharef
Member

Posts: 68
Joined: Sep 2007

Sat Dec 15, 07 01:56 AM

Thanks quantumar for the details. The more I read articles and posts of this forum,
the more I realise the large gap between the theory and real practice. Many model
look very good and efficient but the implementation and use are usually very limited.

Posts: 65
Joined: Dec 2004

Sat Dec 15, 07 02:43 PM

Quote
Originally posted by: fars1d3s
A lot of bank traders use a tactic called "stop-hunting" where they move the markets toward levels where lots of stops are concentrated, executing them, and then letting the markets move back so they can book the profits. Do you think this ethical ?

Did you read that out of some 20 year old book ? Most traders aren't going to show their hand so readily these days, and a lot of gaming goes on so you can't take what you see at face value.

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fars1d3s
Senior Member

Posts: 452
Joined: Aug 2004

Sun Dec 16, 07 06:55 PM

Quote
Originally posted by: mwam
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Originally posted by: fars1d3s
A lot of bank traders use a tactic called "stop-hunting" where they move the markets toward levels where lots of stops are concentrated, executing them, and then letting the markets move back so they can book the profits. Do you think this ethical ?

Did you read that out of some 20 year old book ? Most traders aren't going to show their hand so readily these days, and a lot of gaming goes on so you can't take what you see at face value.

No, this is what I read on a variety of websites recently. This also happened to me personally, where I was forced to close out some options positions at disadvantageous prices. I was killed in USDCAD and GBPUSD, but after finding out about this, I managed to survive in EURUSD.

Posts: 164
Joined: Mar 2005

Tue Dec 18, 07 04:06 PM

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A lot of bank traders use a tactic called "stop-hunting" where they move the markets toward levels where lots of stops are concentrated, executing them, and then letting the markets move back so they can book the profits. Do you think this ethical ?

This is useful for bank traders when options expire(exercised) in FX. They are usually able to move the market right before the seconds of exercise time of options if they know their clients have big positions. However it's harder and riskier to do it for the spot stop-loss orders, sometimes they get burned trying to trigger orders on the spot or they can't even move the market.

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fars1d3s
Senior Member

Posts: 452
Joined: Aug 2004

Wed Dec 19, 07 01:23 AM

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This is useful for bank traders when options expire(exercised) in FX. They are usually able to move the market right before the seconds of exercise time of options if they know their clients have big positions. However it's harder and riskier to do it for the spot stop-loss orders, sometimes they get burned trying to trigger orders on the spot or they can't even move the market.

Thank you for confirming. I consider this very unethical.

Posts: 164
Joined: Mar 2005

Wed Dec 19, 07 03:45 PM

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I consider this very unethical

I know fire burns where it falls but in this case, whether what they do is ethical or not depends on your perspective.
If you are choosing not to hide your orders with all the tools and different order types you have at your disposal, I think that's a mistake on your part. It's a fair game that they are only doing this when ever people are willing to open their hands. It's like a poker game. If you are willing to open your cards to other players you don't expect them not to use that information to their advantage, after all everybody is trying to make money. If there were no order types or ways of hiding your orders and they would take advantage of that I would agree with you, however that's not the case. Also on the flip side since you know what they are doing, it's also a fair game that you can model this behavior and make money whenever they are trying to push the markets.
I believe it's individual's responsibility to do their work ahead before trading these markets to understand how everybody trade and how that effects your trading.

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