Algorithmic FX Trading : Identifying the optimal combination of FX algorithms
The decision on whether or not to use FX algorithms is an easy one
to make in today's market, however deciding which ones to use is a
more difficult choice. For example, is it better to deploy an
off-the-shelf algorithm or a customised solution? How much
tailoring can be done with an off-the-shelf solution and how much
work on the clients' side does customisation involve? Nick Pratt
examines some of the key issues.
Are there new tools available to help identify the cause and
effect of specific trading techniques and suggest new
combinations of algorithms to adopt? Similarly, are there tools
available to help back-test and fine-tune new execution
strategies prior to deployment? Or better still are there some
kind of metrics that can be used to measure the success of
specific algorithms or to determine whether they are using an
optimal combination of FX algorithms?
A clear sign that FX algorithms are becoming more popular is the
fact that the major sell-side banks, Credit Suisse, Deutsche Bank
and Citi among others, are continuing to develop and market new
execution algorithms for their buy-side clients. Deutsche Bank
has just released its AutobahnFX Algo, which is designed to
fine-tune its FX execution service by offering a greater choice
of strategies. The three algorithms on offer are named Limit
Order+, Slicer and Limit Order Slicer.
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