Momentum strategy backtest on FX

3
Major currency pairs.
35
Signals backtested.
+2x
End-client increase.

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 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.