A Multi Strategy Approach to Trading Foreign Exchange Futures

26 Pages Posted: 28 Jan 2019 Last revised: 5 Feb 2019

Date Written: January 25, 2019

Abstract

In this article we present a systematic multi-strategy approach to trading foreign exchange futures for a managed futures portfolio. Our central finding is that there is more alpha to be derived from combining different indicators compared to hand engineering each indicator. We show that combining technical indicators like momentum and mean reversion with fx carry indicators leads to significant improvement over individual indicators. Through an end to end systematic portfolio construction methodology, including indicator construction, normalization and combination we are able to improve the Sharpe Ratio of the resulting portfolio over the best performing single indicator by 60% when evaluated in an unbiased walk forward backtest.
Code available in the Appendix

Keywords: Foreign Exchange, Derivatives, Portfolio Construction, Multi-strategy, Managed Futures

JEL Classification: C61, F31, G11, G12, G15

Suggested Citation

Srivastava, Sonam and Chakravorty, Gaurav and gupta, sanchit and Awasthi, Ankit, A Multi Strategy Approach to Trading Foreign Exchange Futures (January 25, 2019). Available at SSRN: https://ssrn.com/abstract=3322717 or http://dx.doi.org/10.2139/ssrn.3322717

Sonam Srivastava

Wright Research ( email )

Mumbai, 400098
India

Gaurav Chakravorty (Contact Author)

Qplum ( email )

Harborside 5, 185 Hudson St, Suite 1620
Jersey City, NJ 07311
United States
2013772302 (Phone)

HOME PAGE: http://https://www.qplum.co

Sanchit Gupta

Qplum ( email )

Harborside 5, 185 Hudson St, Suite 1620
Jersey City, NJ 07311
United States
2013772302 (Phone)

HOME PAGE: http://www.qplum.co

Ankit Awasthi

affiliation not provided to SSRN

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