Tuesday, June 24, 2014

Textbook algorithmic Sterling trades | How we diversify

On 3rd June last the Mandelbrot routine entered a EURGBP trade on the short side, which is to say it had been instructed to only sell the pair if a signal arose through the algorithm. We had also set the routine to monitor other pairs, including GBPUSD.

The trade proceeded for the rest of the week without serious incident, barring some excitement around the time of the ECB announcements about interest rates and Mario Draghi’s subsequent press conference.

Then, the following Monday, presumably after market participants had had the opportunity to reflect on matters, the pair started to fall. It continued to do so for the rest of the week until, at the start of the next one, the Mandelbrot routine decided to take off half the position, in order to lock in profit.

It is not always so precise but in this instance the profit was taken off at exactly the right moment, because the rate started to rise after that, until the point came where the algorithm caused the trade to be closed out completely. This happened yesterday, June 24th.


The purpose of taking a trade in another instrument involving the Pound Sterling was in order to provide an element of diversification. In the case of the GBPUSD pair, this meant instructing the Mandelbrot routine to only enter on the long side (we expect the pair to rise).

In this case the algorithm did not receive a signal to enter until the 5th June, the same day as the ECB announcements. Thereafter the trade proceeded in a manner similar to the EURGBP one, with half the position being taken off as shown in the chart above, and the whole trade being exited yesterday (24th) as well.

No comments:

Post a Comment