FX FX MANAGERS
FXTM Do you favor any particular time frame in your strategies? What is your average trade duration and trading frequency?
AL With the exception of intraday trading strategies, which we are not involved in, we do not have a pre-set template for trade duration and
investment horizons. On
the contrary, I believe “horizon diversification” is a crucial c o mp o n en t of an overall diversification s t r a t e g y . H or i z on diversification, c o mb i ne d with “themes/ signals diversification” and “currency diversification”, may help mitigate portfolio volatility. Keeping this framework in mind, while our views can extend several years into the future, the expression and implementation of
those views can occur both
strategically and more tactically, depending on market conditions. As a result, most of our trades’ fluctuate between a few days (say one week) and a few months (3-6 months) for the more strategic trades that exhibit strong trends and allow more staying power (for example trades with no
60 FX TRADER MAGAZINE July - September 2013
negative carry, both in options and forward space).
FXTM What should an inexperienced
trader watch when choosing a time frame?
AL The time frame should be consistent with the rationale for
the trade; to the extent
the two can be associated with one another. For example,
if a
execution between electronic and voice?
AL We use more than fifteen execution brokers and the majority of execution is done by voice. There is a small percentage of execution done electronically, primarily for major currencies.
Both systematic programs and discretionary investment decisions tend to suffer, especially when
volatility is caused by
bullish trade idea on a currency is built around the expectations of
improving economic data,
one should keep in mind which data releases tend to provide the most powerful catalyst for currency moves, and chose the time frame for the trade around relevant release dates. Similarly, it is wise avoiding time periods with
concentrated political or
economic event risk, for which there is no conviction or view.
FXTM How many execution brokers do you use? How do you split
shocks such as central banks interventions
FXTM Which historical data do you use when developing your strategies? H o w important is that?
exogenous
AL On average, G10 currencies offer good q u a l i t y
economic and financial markets data going back to the early 1990s. Prior to 1992, given the existence of the Exchange Rate Mechanism among European currencies--data on exchange and interest rates contain information that is not representative of today’s free- floating markets. For emerging markets, it really is case specific. When carrying historical analysis and back-tests, we focus on periods when currencies have free- floating regimes or, at a minimum, managed within large bands,
allowing for
crawling enough
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