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ALGO UPDATE: JPMorgan Teaches FX Algos Better Trading Techniques
Traders Magazine Online News, May 8, 2019
JPMorgan’s foreign exchange trading algorithms are getting smarter – all the time.
Think Skynet from the Terminator series of movies of HAL from 2001 A Space Odyssey,
The $5.1 trillion forex market is ripe for electronic innovation and JP Moran is giving it to traders via algorithms that learn constantly thanks s to machine learning technology that reviews previous trade performance and applies lessons learned.
In an interview with Reuters, JPMorgan explained that its new algorithm — named DNA or Deep Neural Network for Algo Execution — effectively combined what a multitude of algos currently do, into a single strategy and allowed the framework to judge how a client order should be executed.
For example, a typical time-weighted average price order executed by an algorithm may aim to buy a particular amount of currency over a few minutes or hours. But if the order is not executed within that time frame, the machine will trade aggressively toward the end to buy the required amount.
The new algo aims to take that decision-making process one step further by determining on how best to execute the transaction, based on results of past trades, Reuters reported.
“The objective of an algo is to minimize market impact by executing in an efficient and timely manner,” Chi Nzelu, head of macro eCommerce at JP Morgan, told Reuters. “What we have done is establish a neural network using a machine learning technique which determines how to place the order, at what price and execution style.”
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