I am developing a multi-currency mean reversion strategy. I currently use instantaneous filtering to get rid of potential trades where there is high market noise, low volatility, lack of clear trend and particularly high relative volume. This has proven to be effective but I'm also looking to filter out FX pairs which aren't as receptive to strategy.
My question is how should I go about defining which currency pairs are most suited to the strategy?
Should it solely be based on backtesting results? And if so over what period of time? Or should I be asset filtering based on average market noise and identifying which currency pairs range the most or any other factors?
Thanks for all your help in advance!
If you're talking about correlation, I suggest you pay attention to cross pairs.
I find the following article helpful.
Im not looking to identify correlation. Simply want to find to identify which pairs work best for my strategy
Hi, i would just do a backtest and look at the result for each symbol. Since you are developing a reversion strategy smybols like AUDNZD,GBPNZD,GBPAUD will probably perform well. And I bet GBPJPY is one of the worse ones ;D
At least that's how I do it...
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