Do limits affect performance? Double machine learning helps answer the question, says BestX quant
Foreign exchange execution algorithms often contain price limits, but there is a common concern in the market that setting the thresholds too close to the mid-price will hamstring the algo and hurt its performance. Two experiments we have run show traders need not worry.
We started by analysing algo trades in our large database. Trades with price limits displayed bigger risk transfer outperformance and smaller underperformance compared with trades with no price limits.
The difference in median
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