Momentum strategy backtest on FX

CLIENT

A sell-side firm.

OPPORTUNITY

Our client wanted to develop multiple strategies for FX instruments (EURUSD, USDJPY, GBPUSD) to advise their end-clients on momentum and trends in the FX market.

SOLUTION

Based on an understanding of the end-clients’ personas and our client’s objective, we adopted the following approach:
  • SG Analytics’ team simulated, backtested, and identified a set of 35 signals which were all part of various momentum strategies, including moving average, range breakouts, MACD, weighted MA, etc.
  • Our team refined the signals, backtested them, and simulated scenarios across all major currency pairs.
  • The team identified various candles and the frequency of time lengths from 5 min to 60 min, which we optimized for each individual currency pair.
  • The team included dynamic candle allocation and how to switch candles and frequencies as part of the backtest.
  • As a daily mechanical work to the sell-side firm, SG Analytics passed over a full working model with entry. bet sizing, stop loss and exit signal.

 Value Delivered

  1. Based on the signal the signal generated by the momentum strategy, the client was able to increase its client base from 15 clients in FX to over 50 clients.
  2. The model enabled the client to use signals on low, medium, and high-frequency basis regularly to generate consistent calls with over 60% accuracy and hence get a sound traction from their clients.
  3. The client firm later gave us a separate project to extend and backtest the signals for commodity and equity markets.
3
Major currency pairs.
35
Signals backtested.
+2x
End-client increase.

Value Delivered

►
1
Based on the signal generated by the momentum strategy, the client was able to increase its client base from 15 clients in FX to over 50 clients.
►
2
The model enabled the client to use signals on low, medium, and high-frequency basis regularly to generate consistent calls with over 60% accuracy and hence get a sound traction from its end-clients.
►
3
The client firm later gave us a separate project to extend and backtest the signals for commodity and equity markets.