Asymmetry of the inter-market correlation peaks reveals leader-follower effects in FX.

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Market Correlations. FORTS Derivatives Market Diagnostics. December 2014.
Wednesday, 10 December 2014 00:00

FORTS metaanalytics December 2014

Maraging Partners, a Moscow-based FX management advisory firm, continues publishing its monthly quantitative FORTS analysis. An English version of the December 2014 issue is available at the link.

November 2014 Forex Correlation and Inefficiency Report
Saturday, 06 December 2014 11:13

Here is the November 2014 update of the ForexAutomaton correlation analysis report, with its distinctive emphasis on time-lag dependence of auto-correlations and intermarket correlations.The report follows structure and definitions explained in a separate document, which can be used as a user manual.The report deals with the following exchange rate time series: AUDJPY, AUDUSD, CHFJPY, EURAUD, EURCHF, EURGBP, EURJPY, EURUSD, GBPCHF, GBPJPY, GBPUSD, USDCAD, USDCHF, USDJPY.

Table 1. Forex Automaton Index updates for November 2014. CERPI -- Currency Exchange Rate Predictability Index,CERCSI -- Currency Exchange Rate Correlation Strength Index.

volatility 1H.1MCERCSI 1H.1MCERPI 1H.1M
Site Development, August 2014
Saturday, 09 August 2014 11:15

The high volume of robot traffic makes uninterrupted operation of the site problematic. To help reduce this problem, I have:

  • created a resource, Forex Automaton, which is used to post trading system output

  • made most of the site password-protected

  • upgraded the hosting plan

  • reduced Google crawling rate

What are the goals of the project?

Our primary goal is to maintain a public information service providing financial markets forecasts, based on our proprietary forecasting tools: an automated trading system -- a Forex Automaton™. A live forecasting system operating on daily time scale, Danica, is online since late December 2009. An hour-scale forecast system, Heidi, and a daily signal EUR/USD system running a model portfolio, Demi, were launched in August 2010.

Our secondary goal is to discover, quantify and monitor the very existence of sustainable opportunities for profit-making via systematic trading. Or simply put, to monitor the degree to which these markets are more predictable than a "fair game" -- to a trader without access to insider information.

ForexAutomaton 2013. The Fifth Annual Summary of Researh Progress
Sunday, 14 April 2013 16:53

Success of algorithmic trading has as much to do with the market as with the nature of the algorithm. While the algorithms may vary and may have terms such as artificial intelligence, adaptivity, machine learning, neural networks and the like associated with them, the phenomenology of what it is that the machines are "learning" all comes down to correlation measurements of varying order -- pairs, triplets, quadruplets... -- over a variety of time lags and time scales, performed on the market time series.

ForexAutomaton began its life on April 02, 2008, five years ago. Year V was exceptionally productive for the project. Here are the main highlights of this annual review:

  • An Index of Correlation Strength (CERCSI) and a Predictability Index have been formulated and the history of these measures has been established.
  • Index of Correlation Strength reveals that a regime switch in the market dynamics took place in Summer 2007.
  • Danica, the daily forecast system, has confirmed its status of an "Anti-System", delivering its forecasts in the non-random and consistent opposition to the market reality.
  • The challenge of regime switch has been addressed by implementing an algorithm, nicknamed Twisted Pair, to incorporate sensitivity to two basic types of memory effects: trending and reversion to the mean.
  • Danica, the daily forecast system, and Heidi, the hourly system, have been upgraded with the Twisted Pair algorithm.

World Time

New York: 19:53 London: 0:53 Berlin: 1:53 Tokyo: 9:53


MaRaging Partners, a Moscow-based currency consultancy, have published their FX market view for Q4 of 2014. The report covers EUR/USD, USD/RUB, and EUR/RUB, and combines news-based and quantitative approaches. Maraging Partners expect lower USD/RUB by the end of Q4 2014:

"As we noted in the previous issue, investing in Russia brings about risks of own government reprisals for the residents of Euro - Atlantic countries. Investors able to enter Russia under the radars of Euro - Atlantic governments, for example, via Hong Kong or Singapore, find themselves in an exceptional position and, according to market laws, are reaping a peculiar form of rent, known as protection rent. Today's exceptionally low rouble exchange rate reflects not so much the macroeconomic and geopolitical risks to Russia's economy -- after all, these have not gotten worse because of a territorial enlargement -- as they provide the protection rent, creating a super - attractive entry point for such investors. This rent is paid for largely by those who create the artificial entry barriers responsible for the protection rent. The payment is a form of an opportunity cost. The exceptional position of such investors is unlikely to last long, because the laissez faire investment climate of these jurisdictions can easily attract more participants. This is a question of changing the business domicile, and for many investors with interests in Russia, who control, as we know, capitals of Russian origin, already re - domiciled at least once, this is a question of time. In such a scenario, the rouble weakness which is part of the mechanism of the protection rent, will also be short lived. Thus the barriers called upon to create artificial costs for Russia, in fact, amplify and accelerate the Eastbound exodus of wealth and power from the West.

It seems to us that one of the investment themes of the Q4 will be monetization of the protection rent. To be able to take part in this process, one has to begin selling USD and EUR forward already today."

See full text of the report on the Maraging Partners web site.