Sphere of application

The study and practice show that GeWorko Method application can be exclusively useful for various ideas and trading strategies. We will bring only a few of possible examples of its application below (from simple to complex).

The trader may need to trade the asset (due to some trading ideas or investment restrictions), which is quoted not like in common currency pair, but in another currency at the trader’s discretion. The trader may get just a new cross rate, but the method can be applied for non-currency assets, as well. For example, trading Gold, quoted against the Australian Dollar -there is no such instrument in the common market – in this case the trader creates «XAU/AUD» personal instrument, gets all charts on it for full analysis and a trading opportunity.

This class can also include the opportunity to quote a currency (or even an asset) against a subset of common instruments, used by the trader. For example, a trader, due to his investment preferences, wants to analyze and trade the Singapore Dollar, Brent Oil, Gold and Caterpillar Inc. stocks, quoting all these instruments against the Australian Dollar (thereby choosing AUD as the funding currency). In that case, it will be enough to create four PCIs (it takes several minutes) - “SGD/AUD”, “#C-BRENT/AUD”, “XAU/AUD, “#S-Cat/AUD”.

The strategy of popular pair trading is based on finding differences in the dynamics of price movements in two assets. The prices of these financial assets can respond to the same economic factors, but the speed and sensitivity of the reaction may be different; on the other hand, several factors may affect these assets in different directions. For example, the trader creates a personal instrument on two stocks of high-tech companies «# S-Google / # S-Apple» (giving weight to each component in the structure), expecting within his strategy that Google stocks will grow faster than Apple stocks with general growth of high-tech market, and in a falling market Google will fall slower than Apple. The trader creates this PCI and gets an opportunity to test his assumptions, based on the deep history, as well as to trade this personal instrument (in the deal of buying this PCI the component of Google stocks will be bought, and the component of Apple stocks will be sold; in the deal of selling - vice versa). Note that this scheme in its objectives and results is similar to the scheme of popular spread trading strategy.

This class may also include a strategy of "Trading around the average", which is based on a stable long-term correlation between two assets, but the short-term correlation may deviate from the average level and come back to it. For example, in order to analyze the relation between WTI oil and BRENT oil (the difference in the prices of these assets arises from the peculiarities of their pricing), the trader can create a PCI, consisting of "OIL / # C-BRENT» (by ticker on our terminal), analyze this relation based on the deep history and trade this personal instrument at peak deviations from the average.

Popular trading of asset portfolios is used by private traders and fund managers within a large number of investment strategies. A trader can quickly create several different simple portfolios in the form of PCI with all components quoted against the U.S. Dollar, compare these portfolios based on graphical analysis of deep long-term history, select the best portfolio, according to his criteria and trade the selected PCI. Moreover, the composition of the portfolio can be quickly modified with changes of the economic situation and change of investment priorities.

Traders get an opportunity to create portfolios, based on different principles - by asset class, by industry, by country, realizing their personal portfolios, similar to popular indices of ETF (Exchange Traded Fund). For example, a trader can analyze and trade a portfolio of energy assets (available at our terminal in the list of CFD Commodities), for these purposes creating the PCI with the composition of "(# C-BRENT + # C-NATGAS + # C-HEATOIL) / USD" and with weights of components, according to his investment preferences. Of course, the trader can create a similar portfolio, quoted not against the USD, but in any other currency or asset.

There are complex investment strategies associated with buying a portfolio of assets and the simultaneous selling of another portfolio. Within Geworko Method one portfolio is base, another one is quoted – in the process of trading when buying such a PCI, the components of the base portfolio are bought and the components of the quoted portfolio are sold. For example, a trader can implement a strategy of buying U.S. stocks and selling European indexes in certain investment periods and reverse strategies in other periods. For that a PCI is composed "(DJI + SP500 + Nd100) / (DE 30 + GB 100 + FR 40)" with component weights equal to each other (in dollar prices of respective CFDs on indices).

Analysis and trading of such complex portfolios can be included in a new class of pair trading on two portfolios (in its objectives and results, this scheme is similar to spread trading of portfolios).

In order to work with PCI by GeWorko Method, you should download the terminal and open an account in NetTradeX platform.

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You can learn how to create and use PCI through GeWorko Method on NetTradeX terminal on "Quick Guide" page.

We also regularly publish articles on the application of GeWorko Method in "Articles about the method" section.