Thursday, April 30, 2015

The core of the OmiCronFX Mandelbrot algo routines | The Forex month-end fix

The OmiCronFX Mandelbrot Forex algorithmic trading routines have been over five years in the making, but bring together various strands from a lifetime of experience which itself goes back over 40 years. They involve three core elements. These are:

·         Ethical high frequency trading
·         Math, trading expertise and instinctive computer programming skill
·         Detailed research into historical exchange rate patterns and their underlying causes

Ethical high frequency trading

Computers are here to stay for all activities, and FX trading is no exception. The Mandelbrot routines are powered by the careful discovery and application of the factors that place probability squarely on the side of their creator, combined with the implementation of the most comprehensive and effective risk management and profit retention techniques in existence. The routines provide trading discipline, split-second decision making and infinite patience. They are not robots – OmiCronFX trading is done in a manner that is systematic rather than automatic. Forex trading is too complex for anything else.

Math, trading expertise and instinctive computer programming skill

Your commentator has always had an affinity for mathematics. He has qualifications in Civil Engineering and Computer Science, and an MBA from Trinity College, Dublin. He is a former joint owner of a company that developed mathematical software for engineering applications and for the resolution of transcendental equations.

He has been trading since the 1990s, initially in equities, then in options, equity indexes and Forex.

Deep, detailed research into historical exchange rate patterns and their underlying causes

After gaining his MBA, the founder of OmiCronFX was a business analyst with Colgate Palmolive Company and Shell Oil. This work was centred on data mining and analysis so that meaningful outputs could be presented to senior management to drive tactical and strategic business decisions. The same skills and attention to detail have also gone into the development of the Mandelbrot Forex trading routines. Here, using Mandelbrot, historical exchange rate movements are examined in the context of the fundamental and technical analysis of conditions that pertained at the relevant times. This has been coded into the software logic. There is continuous monitoring of outcomes to ensure that the assumptions made remain valid.

Beware the month-end fix

We sat on the sidelines yesterday, as we normally tend do on the last day of the month. This is because a choppy, non-directional market can be expected, due to what is known as the month-end fix.

Around the end of the month, traders in all kinds of trading instruments (equities, bonds and even currencies other than the one they have as their home currency) like to hedge their open positions in order to limit the effects of exchange rate risks, and so report a good outcome for the month. This activity has the effect, very often, of creating a market where making profits can be difficult. This effect is even more pronounced when the end of month also coincides with the end of the quarter, or of the year. So we keep our powder dry. The process is known as the month-end fix. Here the word “fix” is used in its technical sense, which means to make something unmovable (in this case the monthly profits) rather than in any way that might give the impression that something untoward was going on.

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