2020-04-01 Bloomberg Markets Magazine

(Jacob Rumans) #1
Minde is an FX and macro market specialist and Bruno is a research and
technical analysis market specialist at Bloomberg in New York.

the rules in the bottom portion of the screen to swap in your
new variables for the appropriate Values (FIG. 5).
Once you’ve done that, click on the Save As button to save
the strategy. Then click the Launch button and select Parameter
Optimization from the red toolbar. You can specify a range of values
for your variables in the Selected Parameters section of the screen
that appears. To test a 20-point range around the default values,
enter “-30” and “-10” as the Overbought Min and Max and enter
“-90” and “-70” for Oversold. Click the Submit button, and the
system will process the various combinations.
When the processing is complete, you’ll receive a message.
Click on the link to see a table of the various combinations and
their profitability. The most profitable versions of the strategy


used Overbought values of -21, -22, and -23, with Oversold levels
of -79 and -80. For more insight into the optimal values, click the
3D Surface tab. Select Overbought as the Y axis and Oversold as
the X, and you can see where the strongest grouping of positive
bright green falls among the values (FIG. 6).
This is one example of tweaking an FX overlay strategy to try
to generate alpha. In this case, the best combinations of values don’t
change the number of signals: 10. However, they do increase the win
ratio to 90%, raise the Sharpe ratio to 0.86 from 0.70, and lift the
overall profit of the strategy by more than 40%, to $279 million.

Here, we’ve replaced
the default Value with
the Oversold variable.

The most profitable
versions of the
strategy used
Overbought values
of -21, -22, and -23.

We’ve created two
variables and assigned
them the default levels
of -20 and -80 so
we can run an
optimization to see
how other levels
perform.

Fig. 5 To check whether the default levels of the Williams %R strategy are the best,
click on the Review button in BTST to open the Strategy Definition page.

Fig. 6 For more insight into the most profitable parameters for the strategy,
click on the 3D Surface tab in the results.

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