Trading

The Cambridge Strategy™ has been designed and is managed by three long term industry professionals. The objective is to identify short and long term moves in the major currency pairs using a series of predetermined parameters. Positions are established when all the parameters “match”. Once trades are constructed strict stop loss levels and profit objectives are entered. When a potential long term move is detected, a trade will be established and held for a longer period. Again positions are protected by strict stop loss levels. The system is designed to perform in trend-less as well as trending markets. Cambridge currently tracks these signals over multiple time frames in eleven currency pairs, 24 hours a day.

Automated programs supplement the system, but all trades are executed by a member of the management team to minimize “Event Risk”. In addition, the automated programs recommend entry and exit points, but actual stops and take profit levels are executed by a member of the management team utilizing known support and resistance levels in the market.

Risk Management

Active risk management is a core part of the strategy. Cambridge bases its leverage and risk management on an approximation of return distributions based on Monte Carlo historical simulations.

Leverage is calculated on a monthly basis. Leverage employed is essentially a self correcting mechanism that relies on the historical Sharpe Ratio, and the historical volatility of returns to proactively and dynamically adjust leverage to optimize returns. Further, "ruin theory" is employed to generate probabilities using Monte Carlo simulations that dictate the notional risk inherent in each trade, which in turn dictates size, leverage and VAR.

VAR is monitored in real time and in addition to individual trade VAR limits, portfolio VAR limits are in place, which contol risk in situations where high positive correlation may exist between trades.

Trades are diversified over a number of the major currency pairs and time frames, and this mitigates risk. During periods of extreme volatility the leverage is adjusted to suit the conditions.

Risk is monitored constantly, and VAR reports are produced daily. Maximum leverage employed by the Fund is never more than 5:1.

Differing time horizons and traded currency pairs in the strategy mean that maximum exposure to the markets at any one time is extremely unlikely.

A Paper on the Cambridge Risk Strategy is available in the Research Section.