Currency · Global · CFDs, forwards, futures · Daily · Global Free

Momentum and (Un)Informed Flows in FX market

Academic paper

Trading with the Informed and Against the Uninformed: Flows and Positioning in the Global Currency Market

AuthorsAldo Barrios; Robert Franolic; Davide Giovanardi; Michael Melvin

Institute

Princeton University
?m3ter
Stanford University
University of California, San Diego
?University of California San Diego

Paper linkhttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=4215040

Strategy in a nutshell

Trade G10 currencies daily by following fund flows and FX momentum, combining both strategies via the Black-Litterman framework. Rebalance positions based on flow reversals and overcrowding signals.

Economic rationale

Fund flows are more informative than non-fund trades, and combining them with FX momentum mitigates low performance or drawdowns, capturing profitable daily currency movements.

Backtest performance

Annualised return11.74%

Volatility11.53%

Sharpe ratio1.02

Maximum drawdown-12.07%

Win rate71%