Davos is an acronym for Dynamically Adjustable VOlatility Strategy.
Davos, a short-term/high-frequency Forex strategy, is applied to major and most liquid currency pairs (EUR, USD, JPY, AUD, and GBP). The strategy is purely quantitative, and based on an analysis of price dynamics. In the development of the strategy, particular attention has been paid to robustness: very few parameters, same value of parameters for all instruments traded, no over-fitting.
Davos takes its trades in the direction of the short-term trend; typically, positions have an average duration of 36 to 48 hours. But under certain conditions positions can last as little as less than one hour or as much as several weeks.
There is no mean-reverting, or contrarian aspect in the strategy.
Position sizing is adaptable, and aims at keeping the daily standard-deviation of daily returns as close as possible from a target defined by the investor. An annualized volatility target of 8% will lead, grosso modo, to an exposure of 100% of the nominal invested asset, which means no leverage.
There is never addition to existing opened positions, either winning or losing.
Each instrument has an opened position about 95% of the time.
During strong trends, lasting more than a couple of days, Davos is expected to behave very profitably. Non-trending markets are more difficult to trade; but unlike traditional trend-following approaches, Davos can also be profitable in this type of configuration due to its short-term and very adaptable nature.
Davos is a “stop and reverse” strategy during European trading hours. Outside of these hours, positions are protected by stop orders, which are simple stops and not stop and reverse ones.
