Hi guys! Andrea Unger here – people know I’m a systematic trader and sometimes they ask if the system should always be on.
This is a tough question actually and the normal answer is “yes”: system should always work, but there are special cases such as the Referendum on Brexit for example; or the American election -the election where Trump won- where we can expect a high degree of volatility in the market and the moves that take place, in that case, have nothing to do with what markets normally do. So, considering that our systems are built on the specific identities of the markets, on what we do, on what we expect we do; when we can expect that the market will do something that is not normal, then we have useless systems. It’s like driving with a Ferrari on a country road: you have a very nice car but it’s not the right place to use it.
So actually, those are cases where common sense would tell you to better switch off everything, flatten your positions and wait to see when things get normal again and go back to normality.
In the specific case, you could consider what the surprises would be and eventually if you have open positions in the direction of a surprise, you could consider keeping those positions opened. For example, on the American election, Hillary Clinton was expected to win and that would not probably lead markets up very much, so having short positions opened, you could actually keep them and you knew that if Trump would win those short positions would show an interesting gain. Obviously – I mean – this is common sense and knowledge after the facts, so my suggestion is: when you are in front of specific turbulent events you better switch everything off and see when things go back to normality again.