Discussing the article: "Forex spread trading using seasonality"
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Check out the new article: Forex spread trading using seasonality.
The article examines the possibilities of generating and providing reporting data on the use of the seasonality factor when trading spreads on Forex.
Here we will consider the search for statistical relationships and available tools, as well as discuss the potential of the pair trading approach compared to more conventional single currency trading.
Neutrality of a strategy in relation to the market means that the profitability of the strategy does not directly depend on the direction of the price movement of an individual symbol. This is achieved by creating a hedging position between two or more symbols, whose profits and losses mitigate each other.
One of the main characteristics of such a strategy is minimal risk, since it exploits low-level market dependencies. However, this trading approach does not imply risk-free profit.
In the context of statistical arbitrage, the main task is to create a market-neutral trading portfolio, which is an extended version of pair trading. To achieve the neutrality effect, the portfolio should consist of highly dependent symbols so that the upward movement of one symbol compensates the fall of another. In other words, we create a closed trading system, in which funds are redistributed between portfolio assets. Pair trading is a special case of statistical arbitrage and the most popular strategy of this type.
Author: Roman Shiredchenko