T2W Trading Community

Forex
Currency strategies are sometimes presented as a stand along category. Another time they are for their same risk/return characteristics included among managed futures strategies.

Currency traders usually specialize in their market segment only and therefore are able to offer so-called passive strategies as well, which investors use to hedge their currency exposure. That is why forex managers have sometimes much more assets under management then managers in other strategies. An example can be FX Concepts, an American company managing about $12 billion, or London’s Record Currency Management managing as much as about $53 billion.

Short term / medium term / long term strategies
Under short term strategies we understand everything from intra-second trading (exclusively within a systematic approach) to holding a position for several days. The trading frequency is very high so it is important to monitor and analyze the impact of commissions and slippage.

An example of intra-second trading is RSJ Invest, a Czech company trading with the help of mathematical models of such a high volume that its activity counts for about 4% of total volume on London’s exchange Euronext.liffe.

Medium term positions are held from several days to several months. Option trades are a good example of this, with their length of about two months.

Long term strategies do not focus on hot news or the current market behaviour. Instead they monitor seasonal events and long term market tendencies. An example could be strategies developed on the basis of a fundamental analysis or spread trading of contracts with different months of delivery.

Sector specialists vs. diversified portfolio
In this case strategies are not necessary different, but there are specialist traders (focusing at “their” market only) or global players, who create highly diversified positions. Systematic CTAs are generally more diversified.

Due to high demand from investors a lot of strategies are currently emerging that focus on energies, metals and agriculture commodities. However, those are bank products rather than individual manager strategies or investment strategies of smaller firms.

Funds of funds
Funds of funds, better known as CPOs (commodity pool operators), specialize in the selection of best traders, from which they then create a diversified fund. The advantages are lower minimum investment and access to closed funds, the disadvantage extra fees for their activity.