FX FX MANAGERS issues and continually reexamine them.
FXTM Could you give us an example of a trade that you might have implemented in the past but that you would not repeat today? What is the most important lesson you learnt from past trading decisions?
AB While there have certainly been losing periods in the past that I wish we had not incurred, as a systematic trader all of our trades are determined based on the model so the losses were not a result of a “wrong” decision. One lesson I have learned is to resist the temptation to tinker with the model during a losing streak since ups and downs are a normal part of systematic trading.
In
addition, I never try to “cherry pick” trades since the Program is 100% systematic in its choice of entry and exit.
FXTM Do you use a blend of strategies or one only?
AB I would say that our model is a single strategy by definition but has two
56 FX TRADER MAGAZINE April - June 2013
followed by breakouts in price). Trends help the medium term component excel but the short-term module can prosper without trends as long as there is some price consolidation followed by a few days of rapid price acceleration. Te toughest environment for the model is one of a steady grind down in volatility. Another difficult setting for the methodology is when the correlation among currencies increases
components that focus on different time horizons.
FXTM What are the market conditions that you consider ideal, and which ones are the most challenging, for the performance of your strategy?
AB Our model tends to perform best during periods of cycling volatility (which is typically produced by consolidations
dramatically, reducing independent price movement. Over the past 12 years we have seen strong performance from the FX Program during periods like 2001-2003 and from 2008 to now, times when volatility was normal to high compared to stretches like 2004-2007 when volatility declined steadily and ultimately fell to historic lows.
FXTM Can you give us an example of a memorable winning trading decision?
AB Our best trading decision was probably our choice to stick to the long- term plan and resist making changes to the model during the several years of slightly negative performance in the mid-2000’s. Volatility in foreign exchange fell steadily from 2004 through
mid-2007, reaching a record low. Tis environment was challenging for our methodology since trends were scarce and even short-term trading was difficult. We viewed the volatility drop as temporary given that volatility has strong mean-reverting properties even though it lasted far longer than we had anticipated. Our diagnostic studies as well as our qualitative assessment confirmed no structural changes to
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