The Cambridge Strategy™
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. |