Quantopian:Time Series FX for pattern recognition

An Empirical Algorithmic Evaluation of Technical Analysis

Andrew Campbell of Quantopian has produced some interesting research on pattern recognition as per the above link.

I was puzzling yesterday about currency conversion and back testing on patterns.

On trend following I have decided the “correct” way to deal with a multi currency Portfolio is to convert all time series to the base currency prior to running my daily orders (and of course for any backtesting). In my view there is little point in declaring an entry into the yen version if the Nikkei if you are a dollar investor – you need to take the currency into account to check the trade still makes sense I’m dollars.

Many backtesting programs work with native currencies and only convert the P&L back to the base currency.

While my method is fine for long term trends, I suspect it would create havoc with other types of pattern such as those being considered here.


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