How many times should you test an algo?

XTX Markets' Matt Clarke evaluates how often traders should test an FX algo to understand its outcome

sterling dollar chart

The role of luck – both good and bad – is commonly underappreciated in the world of algorithms. Many traders will try an algo five times and then form a strong opinion based on what they have observed. But is this reasonable?

In the following thought experiment, this opinion piece focused on a single currency pair – sterling/US dollar – and chose three order sizes: 10 million, 50 million and 100 million.

We randomly selected 10,000 order start times over the past few months then flipped a

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