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Macronews_Strategy http://www.deltixlab.

com
An Automated FX Trading Strategy using Macro News events
By: The DeItix Quantitative Research Team
Introduct|on
1hls paper oescrlbes Lhe lmplemenLaLlon of an auLomaLeo quanLlLaLlve lx Lraolng sLraLegy baseo on macro news oaLa
provloeo by 8avenack. 8avenack sources news from a varleLy of sources from whlch lL proouces an array of
analyLlcs (lncluolng senLlmenL, relevance ano novelLy) ln real-Llme, ano whlch are avallable hlsLorlcally.
We unoerLook Lhe research ano lmplemenLeo Lhe sLraLegy ln Lhe uelLlx CuanLCfflce research plaLform, a purpose-bullL
C# oevelopmenL sLuolo wlLh embeooeo maLh, sLaLlsLlcs ano oaLa llbrarles.
Cur Lhesls was: ooes Lhe arrlval of macroeconomlc news from Lhe worlo's largesL economles brlng aoolLlonal volaLlllLy
Lo Lhe markeL? 1he hlsLorlcal oaLa seL useo ls oescrlbeo below:
News Data from 1 March 2012 t||| 1 August 2012:
More Lhan 1.1 mllllon messages
useo subseL of macro-economlc news for uS (287,000 recoros), Cermany (7,800), Lu (3,700) ano
!apan (14,400).
Market Data from 1 March 2012 t||| 1 August 2012:
1hree currency palrs: Lu8uSu, uSu!?, Lu8!? (blo/ask quoLes)
Approx 100 mllllon markeL oaLa messages
News data was f||tered by the fo||ow|ng news types:
consumer-prlce-lnoex
prooucer-prlce-lnoex
unemploymenL
reLall-sales
gross-oomesLlc-prooucL
ourable-gooos
lnLeresL-raLe
consumer-confloence
home-sales-exlsLlng, home-sales-new
currenL-accounL, currenL-accounL-surplus, currenL-accounL-oeflclL
consumer-spenolng
[obless-clalms
lnflaLlon
Lraoe-balance, Lraoe-balance-oeflclL, Lraoe-balance-surplus
Lxtra f||ters app||ed were:
news relevance: 8LLLvANCL = 100 (maxlmum relevance)
news novelLy: LNS = 100 (maxlmum novelLy)
Macronews_Strategy http://www.deltixlab.com
1est|ng the thes|s
As a measure of volaLlllLy, we calculaLeo Lhe annuallzeo sLanoaro oevlaLlon of log reLurns lnsloe S mlnuLe wlnoows of
10-sec bars (l.e. 30 bars). We also calculaLeo varlance raLlo
1
:
vk = nllO {N) / { A1k{N) * 5Ok1{N))
where
N = 30, nllO {N) ls hlgh/low prlce range ano A1k{N) ls average Lrue range over Lhe N bars perloo
All sLaLlsLlcs were calculaLeo for S mlnuLes before Lhe Llme of Lhe news release Llme ano for S mlnuLes afLer. lor
example, for uS announcemenLs scheouleo for 8:30am, Lhe Llme lnLervals were 8:2Sam Lo 8:30am ano 8:30am Lo
8:3Sam. 1he resulLs, perLalnlng Lo uS economlc news oaLa, are show below:
1
varlance 8aLlo sLaLlsLlcs lnLroouceo by Lo ano Macklnlay (1988):
v8 close Lo 1 lnolcaLes LhaL markeL ls ln a ranoom walk reglme,
v8 > 1 lnolcaLes LhaL markeL ls ln a Lrenolng reglme (wlLh poslLlve auLocorrelaLlon of prlce reLurns),
v8 < 1 lnolcaLes LhaL markeL ls ln a mean reverslon reglme (wlLh negaLlve auLocorrelaLlon of prlce
reLurns).
Macronews_Strategy http://www.deltixlab.com
1est|ng the thes|s
As a measure of volaLlllLy, we calculaLeo Lhe annuallzeo sLanoaro oevlaLlon of log reLurns lnsloe S mlnuLe wlnoows of
10-sec bars (l.e. 30 bars). We also calculaLeo varlance raLlo
1
:
vk = nllO {N) / { A1k{N) * 5Ok1{N))
where
N = 30, nllO {N) ls hlgh/low prlce range ano A1k{N) ls average Lrue range over Lhe N bars perloo
All sLaLlsLlcs were calculaLeo for S mlnuLes before Lhe Llme of Lhe news release Llme ano for S mlnuLes afLer. lor
example, for uS announcemenLs scheouleo for 8:30am, Lhe Llme lnLervals were 8:2Sam Lo 8:30am ano 8:30am Lo
8:3Sam. 1he resulLs, perLalnlng Lo uS economlc news oaLa, are show below:
1
varlance 8aLlo sLaLlsLlcs lnLroouceo by Lo ano Macklnlay (1988):
v8 close Lo 1 lnolcaLes LhaL markeL ls ln a ranoom walk reglme,
v8 > 1 lnolcaLes LhaL markeL ls ln a Lrenolng reglme (wlLh poslLlve auLocorrelaLlon of prlce reLurns),
v8 < 1 lnolcaLes LhaL markeL ls ln a mean reverslon reglme (wlLh negaLlve auLocorrelaLlon of prlce
reLurns).
Macronews_Strategy http://www.deltixlab.com
1est|ng the thes|s
As a measure of volaLlllLy, we calculaLeo Lhe annuallzeo sLanoaro oevlaLlon of log reLurns lnsloe S mlnuLe wlnoows of
10-sec bars (l.e. 30 bars). We also calculaLeo varlance raLlo
1
:
vk = nllO {N) / { A1k{N) * 5Ok1{N))
where
N = 30, nllO {N) ls hlgh/low prlce range ano A1k{N) ls average Lrue range over Lhe N bars perloo
All sLaLlsLlcs were calculaLeo for S mlnuLes before Lhe Llme of Lhe news release Llme ano for S mlnuLes afLer. lor
example, for uS announcemenLs scheouleo for 8:30am, Lhe Llme lnLervals were 8:2Sam Lo 8:30am ano 8:30am Lo
8:3Sam. 1he resulLs, perLalnlng Lo uS economlc news oaLa, are show below:
1
varlance 8aLlo sLaLlsLlcs lnLroouceo by Lo ano Macklnlay (1988):
v8 close Lo 1 lnolcaLes LhaL markeL ls ln a ranoom walk reglme,
v8 > 1 lnolcaLes LhaL markeL ls ln a Lrenolng reglme (wlLh poslLlve auLocorrelaLlon of prlce reLurns),
v8 < 1 lnolcaLes LhaL markeL ls ln a mean reverslon reglme (wlLh negaLlve auLocorrelaLlon of prlce
reLurns).
Macronews_Strategy http://www.deltixlab.com
1rad|ng Strategy
lL ls clear from Lhe resulLs above LhaL Lhere ls a slgnlflcanL change ln shorL-Lerm volaLlllLy of lx raLes afLer Lhe
announcemenL of economlc oaLa. 1he nexL sLep ln our research was Lo oeslgn ano LesL a Lraolng sLraLegy whlch uLlllzes
Lhls observaLlon.
1he sLraLegy oeflnes breakouL buy/sell levels ln Lhe flve mlnuLe lnLerval preceolng Lhe scheouleo evenL. upon recelvlng
Lhe news evenL, Lhe sLraLegy creaLes a long poslLlon lf Lhe prlce exceeos Lhe buy level, ano creaLes a shorL poslLlon lf
Lhe markeL moves below Lhe sell level. 1he sLraLegy Lhen closes poslLlons flve mlnuLes afLer recelvlng Lhe news evenL.
ln back-LesLlng, oroer execuLlon slmulaLlon was oone uslng Lhe relaLlvely conservaLlve 8esL 8lo Cffer mooe: buy aL besL
ask prlce, sell aL besL blo prlce. 1he loL slze for all Lraoes was $100,000.
Macronews_Strategy http://www.deltixlab.com
kesu|ts
&L Curve
Macronews_Strategy http://www.deltixlab.com
kesu|ts
&L Curve
Macronews_Strategy http://www.deltixlab.com
kesu|ts
&L Curve
Macronews_Strategy http://www.deltixlab.com

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