David Metzger CFA, Risk Manager, Dukascopy – Swiss Forex Marketplace
David Metzger CFA, Risk Manager, Dukascopy – Swiss Forex Marketplace

Designing automated FX trading strategies for Managed Accounts

Automated processes in the financial field have for a while been the subject of deep interest and evolution, especially since the breakthrough in several areas of computer science in the 90s. Applied to the investment management process, such interest has been leading to a quest of even more integration of the financial decision-making events chain, and such integration finds its ultimate expression and purpose with the so-called automated strategy.

First Published: e-Forex Magazine 35 / Retail Forex Client / April, 2009

Logically, and not without irony, the same advances in information technology are to the benefit of both automated processes and market efficiency. As it is easier to exploit identified market inefficiencies with an automated strategy, those inefficiencies become scarce and much harder to detect for the same reasons.Automated strategies can be roughly categorized by the environment in which they operate, whether they are deployed by a sell, or buy-side firm. The way they are trying to generate alpha or absolute returns gives interesting information and clue on their core process.  Sell-side firms can be using automated schemes, algorithms and automated strategies to exploit the advantage they have from their privileged access to the transaction flow, clients' trading patterns and market activity. Here, the strategy does not seek to exploit directly exogenous  inefficiencies, but are trying instead to optimize and speed up their procedures, especially over the execution process.Automated strategies...continued

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