Using Forex Macro micro Economic News Events to Predict short Term Voaltility Before 5 Minutes to Two Hourse - open to bidding

Using Forex Macro micro Economic News Events to Predict short Term Voaltility BEFORE 5 Minutes to Two Hours NEWS EVENTS The arrival of macroeconomic news from the world's largest economies brings additional volatilityto the market. Overall methodology •Sources of data: – macro-economic news database –Historical trading tick data from (Froex Broker or tick Data Interface) •Technology – QuantOffice/QuantServer software???? –TimeBase –QuantOffice –Strategy Trading Server (used for simulated real-time deployment) •Major steps of the research: –Creation of initial setup –Analysis of news database ( all source of Economic calendars, Bloomberg, etc.) –Analysis of intraday distribution of macro-economic news –Investigation of main hypothesis that macro-economic news increases short-term volatility –Creation and backtesting of simple breakout strategy with opening signals triggered by news Parameters of setup •RP Data from 2005 to current: –Data clollects from all sources million messages how effects the market –Used subset of macro-economic news for US (287,000 records), Germany (7,800), EU (3,700) and Japan (14,400). •All data was filtered by the following news types: –consumer-price-index –producer-price-index –unemployment –retail-sales –gross-domestic-product –durable-goods –interest-rate –consumer-confidence –home-sales-existing, home-sales-new –current-account, current-account-surplus, current-account-deficit –consumer-spending –jobless-claims –inflation –trade-balance, trade-balance-deficit, trade-balance-surplus •Extra filters are: –news relevance: RELEVANCE = 100 –news novelty: ENS = 100 Macro news intra-day distribution •The experiment has been performed to identify 1-minute time intervals with highest density of macro-economy news with RELEVANCE = 100 and ENS = 100. •Applied the following filters: –Country Filter: UK, AUD,US, DE, EU, JP, FR, Spain, Italy –News Type filter -major economy news types as specified above. –Time interval to collect statistics: Impact of a release of new macro-economic statistics on Short-Term Volatility •Looking at market turn points when major economy news are released for UK, AUD,US, DE, EU, JP, FR, Spain, Italy, Switzerland, US, Germany/EU, and Japanese economy we were interested to evaluate the impact of the newson short-term volatility of FX rates. •As a measure of volatility we used annualized standard deviation of log returns inside 5 min window of 10-sec bars (30 bars). •We also calculated variance ratio (*): VR = HILO (N) / ( ATR(N) * SQRT(N)) whereN= 30; HILO (N) is high/low price range and ATR(N)is average true range over the N bars period •All statistics were calculated for 5 minutes before the economy news release time and for 5 minutes after the release scheduled time, for example for US events scheduled for 8:30, the time intervals were 8:25 –8:30 and 8:30 –8:35 Summary •Empirical analysis shows that the arrival of macro-economic news from world's leading economies increases short-term volatility •A simple breakout strategy triggered by the arrival of major macro-economic news has alpha potential and is a candidate for further research. •Adding an ESS filter helps to improve the performance of this breakout strategy