FX FX MANAGERS
FXTM Do you use Emerging Markets currencies? And do you think individual traders should use them, have
considering to worry liquidity issues?
AL Yes, we are actively involved in emerging market currencies as well
as some small etc. frontier
markets such as Serbia, Nigeria, Uruguay,
Liquid core
em er g i n g cu r r e ncies are suitable for both systematic and d isc r et iona r y s t r a t e g ies . N on - c or e and frontier currencies are not good candidates for systematic strategies; instead, they require traditional analysis of fundamentals and political economy. These currencies tend to be heavily managed and controlled by their central banks, leading empirical analysis to erroneous conclusions about price behavior, correlations and sensitivities to macro variables. Our investment universe covers more
than 30 currencies,
increasing our ability as we seek to generate diversified currency income.
58 FX TRADER MAGAZINE July - September 2013
AL All three receive equal attention, but may be developed in different forms depending on the nature of
the strateg y. Systematic
strategies by design are built around an equal balance of entry
gradually lose its
AL Yes, I believe every systematic strateg y
is susceptible to
Every systematic strategy is susceptible to
profitability, as
there are non-market related reasons to expect strategies to lose their “edge”.
and exit signals, both informed on the but
same set capturing of the
variables, changing
direction of those variables. As per discretionary strategies and trade ideas, the “rationale” for the strategy leads to an “entry signal”, which therefore receives more thought process. Instead, exit signals tend to coincide with stop-out or take-profit rules decided ex-ante, and are grounded on risk management considerations.
FXTM Do you think that every strateg y
gradually lose its profitability, and there are many reasons for this. First, there are non-market r e l a t e d r ea so n s to expect s t r a t e g ies to lose their “edge”. We live in an age where
information is abundant, free and instantly distributed around the world; making it only a matter of “when” not “if ” a knowledge advantage will be eroded. Any static trading rule, basic or complex, that demonstrates superior profitability will eventually be replicated by other market participants.
As per financial markets, over any reasonably long period of time new economic and market conditions emerge, which are meaningfully different from anything experienced in real-
they don’t so much about
FXTM When
developing a strateg y,
do you give a higher priority to building entry signals, exit signals or money management rules ?
loses its accuracy sooner or later, or do you believe in long lasting market rules? Have you ever found a strategy that became profitable again after a long negative phase?
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