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Review of 2012 & Outlook for 2013

Fri, 11 Jan 2013 04:34:25 GMT

Political and economic uncertainty paralyzed the markets and was a drag on market liquidity, which contributed to erratic market moves in 2012. At OLSEN, we introduced new trading models with refined money management rules and upgraded our risk management framework. We were invited to participate in a research project funded by the EU to analyze the microstructure of markets. Our fully automated investment process is well equipped to successfully navigate the increasingly complex financial markets of 2013. (Download PDF)

Performance in 2012

Our investment strategy generated a positive return during the first 11 months of the year; starting at the end of November and even more so in December, we incurred a loss due to the rapid selloff in JPY. This performance profile is typical for our strategy; we lose money when there are strong selloffs and generate return, when the market normalizes again.

Developments in 2012 at OLSEN

At the start of 2012, we implemented a new risk management framework with enhanced risk tools. In parallel, we introduced stricter risk limits. The purpose of the stricter risk limits is to ensure that even in a worst-case scenario of a 30% drop in one exchange rate, we do not hit our stop loss. The risk framework is multi-layered and operates on an individual model level and overall portfolio level.
We have released new trading models based on the latest scientific discoveries. The models feature an improved coastline trading algorithm making better use of long phases of sideways price movements in markets. We also have started to trade currency indexes. These indexes are used to diversify the performance of our trading models. The model enhancements have improved our risk-adjusted returns by approximately 20 percent.
In October, all accounts were successfully moved from OANDA US to OANDA Europe and we also released a new infrastructure and interface for OLSENINVEST. We are happy to hear your feedback.

Outlook for 2013

We continue to work on improving our risk-adjusted return and are working to improve our stop-loss algorithms to reduce the volatility of our program, when there are massive market swings. We have developed a powerful investment strategy that has all the right ingredients to fulfill our expectations in 2013.
On the surface of things, the central bankers project an image of confidence and a belief that the economic system has weathered the storm. The regulators, central banks and governments have used all the tools available to tweak the system to engineer an economic rebound. They have failed to address the core issue of the global economy; there is a significant equity gap at all levels. We need electronic certificates as a new communication layer between underlying financial assets and investors. Such a mechanism will free up assets and unlock the economy.
At Olsen, we are looking forward to an exciting 2013 and are thankful to our customers and our suppliers for the good working relationships.

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