500%+ with a Simple FX Portfolio and Macrowonk Indicators



FX presents an interesting case when trading macro because a position entails inverse exposure to two countries. A long EURUSD position means you’re bullish Euro while bearish US. The Macrowonk indicators allow you to quantify multiple economic variables of both countries to discover trading opportunities.

This case study differs from the others in that we’ve applied some basic money management rules. It is much closer to a complete system that you would actually implement rather than the other case studies that are deliberately bare-bones to eliminate any concerns about over-parameterising to produce a favourable result. We produce 7 indicators for each country we cover(1)With the exception of China where there are no employment or housing indicators due to a lack of reliable data (Leading, Growth, Inflation, Surprise, Sentiment, Employment & Housing). In this case study, we use all of these indicators across 5 FX pairs: EURUSD, GBPUSD, USDJPY, AUDUSD & USDCAD.

Entry and exit strategies are straightforward. Using EURUSD as an example, when a Macrowonk Euro Indicator is > 0 and the corresponding US Indicator is < 0, we take a long position in EURUSD (shorts are reversed).

Positions are sized such that the maximum risk exposure per pair is 5% with a total theoretical exposure of 25% of equity at any one time. Each position has a volatility adjusted stop-loss order that varies depending on the pair. Finally, we apply a simple 200 day moving average momentum filter is applied.(2)Full system parameters are available to clients

The benchmark is exactly the same, without the Macrowonk Indicators so it’s strictly a momentum strategy. We’ve done this to isolate the value that Macrowonk Indicators bring to the table.

Key Metrics:

Benchmark Benchmark with Macrowonk Indicators
Total Return: 385.63% 542.75%
Profit Factor: 2.12 2.95
Return/Drawdown Ratio: 11.61 26.31
Worst Case Drawdown: 33.22% 20.63%

Total return with the Macrowonk Indicators is 542% with a profit factor of 2.95 (meaning net gains were 2.95 times greater than net losses). Not only is the return vastly superior, the Return/Drawdown Ratio is over 2x better when Macrowonk Indicators are applied.

These figures are highly dependent on the equity risk assigned to each position. For example, at 10% per position (50% total equity allocation) return improves to a ridiculous 3182% while profit factor declines slightly to 2.64 and drawdown increases to 37%.

Other Case Studies:

Uncover the Macro Forces Driving Global FX

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Notes   [ + ]

1. With the exception of China where there are no employment or housing indicators due to a lack of reliable data
2. Full system parameters are available to clients