This method can be described as an innovative approach used to study financial markets as well as the analysis of their dynamics. In fact, it is a technique based on the Forex concept, according to which, one financial asset is quoted by another. According to GeWorkoMethod, this concept is expanded for portfolios, which stand for the base and quoted parts. To be more precise, one combination of assets is quoted by another.
Pairs trading is a strategy, also known as spread or arbitrage trading. It can be described as a technique allowing to take advantage of inconsistencies and strong price differences between assets not touching the market neutrality.
Definition of GeWorko Method
It is a technique of coming up with and trading a new class of instruments, referred to as Personal Composite Instruments (PCI). The available financial instruments are used to create this synthetic instrument. The concept of the new class of instruments is fully based on Forex, where B/Q parts are the components of trading instruments. Nevertheless, being based on this concept, the new class of instruments has a substantial distinction: instead of single assets in both the base and quoted parts, the components of these new instruments are base and quoted portfolios.
The portfolios can be made up of instruments from completely different classes such as currencies, indexes, stocks from different markets, and commodities, among others. This implies that aside from containing more than one asset, each part can contain assets from different financial sectors. Furthermore, each component asset features an individual weight in the instrument’s total structure, and this leads to the creation of instruments as per the user’s trading strategies. However, most investors prefer creating instruments with only one currency in each part of the instrument, which will make the personal composite instruments a standard currency pair.
Purpose
The purpose of this method is to analyze financial markets, which is the study of complex interrelations between assets and their combinations. This method offers convenient technology for the technical analysis of complex asset portfolios (the study of portfolio behavior, based on historical data). Ideally, the method is essential to the trader because it allows him realize his trading strategies and ideas through the PCI. It also allows him check his instruments’ behavior, based on long-term historical data and find his optimal ratio of the projected profitability as well as risk tolerance.
GeWorko Method: How it Works
Given that this method is an innovative approach to study financial markets and analysis of their dynamics, it works by allowing you create new financial instruments from a variety of available assets. It uses these assets to study the changes in the relative price of the new instruments and to determine the value of one asset relative to the other, based on a historical retrospective.
Advantages
This method is a unique portfolio trading technique especially for traders with the desire of expanding their strategic capacities to implement their impressive trading ideas and move beyond the “standard” group of financial instruments. Moreover, this method helps asset managers locate optimal risk-return characteristics for their guests or clients. Individual market participants also find it effective since it makes it simple to grasp as well as implement otherwise complex strategy of portfolio trading.
GeWorko Method in Pairs Trading
To apply pairs trading strategy it is necessary to conduct accurate analysis which is quite difficult without the ability to build charts of relative combinations of the interested assets. Traders have to export data from the terminal and spend much time on analyzing it. GeWorko Method can become an easy solution to this problem. Traders can create charts quickly and go ahead with analyzing simple and complex combinations of assets.
Application of GeWorko Method in Other Spheres
NetTradeX (the new generation trading analytical platform) is the trading terminal where this method may be applied in practice. It makes building PCI GeWorko easy, effective and quick. You can get the desired price chart instantly and use a variety of technical analysis tools to predict the price of the created instruments.
Here are a few of possible examples of GeWorko Method application:
- Simple Portfolio of Assets
- Conversion of the quoted currency
- The structure of two portfolios
