| The Investment Process
The STFX model runs a systematic analysis of the markets it is trading to establish a
predicted volatility level for each instrument. This prediction then becomes the basis of
Short Term Trend following orders that are placed in the market Once a order is executed a
series of stop loss and take profit orders are placed in the market place. These are
dynamically and systematically changed as the market moves. The positions are not entirely
target driven and trades will continue until conditions for the short term momentum is
shown to reverse. The average holding period is four days. Each position has a dynamic
stop loss based on its volatility prediction. While initial signals and risk is determine
by the model, the leverage is adjusted depending on the performance of the program and the
number of open positions the model has on at any one time. The program generally commences
a month with a maximum risk exposure of 5% that is divided among different currency
blocks. Position sizes (leverage) and stops are adjusted to keep with each block risk
limit.
Risk Management
Investments, on both an individual and portfolio basis, will be subject to continuous
real-time mark to market as well as an on-going risk management process and portfolio
stop-loss procedure. Accounts will be subject to a monthly stop-loss procedure whereby any
and all positions will be closed out when accounts have suffered a 5% of Nominal Equity
loss from its previous monthly close. It would be expected that investments would already
have been cut back before the stop-loss limit is reached.
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