ALGORITHM
THE ALGORITHM
The Algorithm was tested using historical data collected between January 1st 2010 and December 31st 2019, as provided by a data provider recognized worldwide. This ten year period includes different crisis for different currencies (Pound and Brexit or the Swiss Franc during the Euro crisis during summer of 2011).
The methodology was developed and tested by an experienced trader and implemented by a data scientist to process 100 million data points through thousands of simulations. With this approach we were able to classify the best returns and Sharpe Ratios with different scenarios of Stop Loss and Take profit levels . We were also able to create a strategy to always improve the results by modifying the scenarios mentioned earlier.
Basis for Algorithm
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This normality clearly stays during a large number of time into the same interval (-2%/+2%) for 99.5% of the data.
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Significant difference with other asset classes like interest rates, equities, or commodities and together with the FX liquidity explains our choice for this underlying.
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Algorithm implies an average of 1.5 trades per week and that will also be the periodicity of Tambourine Capital hedge fund valuation.
THE PERFORMANCE
- Very few SHARPE ratio under 0,5 or over 2,5.
- When annual return is above 15%, the ratio is between 0,5 and 1 which means that the volatility is high and between 15 and 30%.
- High SHARPE Ratio (above 2) are for returns below 15% which means volatility below 8%.
