Among trends discussed in 2014 was a growing demand among forex brokers for money managers, both regulated and unregulated. While brokers can do a great job of onboarding new clients, training them to trade can often be a long process. In addition, even after entering the market, many new customers realize that actively trading isn’t there thing. Providing a solution for immediately generating activity from clients and to diversify product offerings are copy trading and money management solutions.
Among new entrants to the money management sector is Algo Ai Strategies and its Daisy artificial intelligence computer system. Having previously focused on marketing its services directly to retail customers, Algo Ai Strategies has recently begun to offer their money management services to brokers as a white label product. Representing one of their white labels, the group behind Algo Ai Strategies was one of the most active exhibitors during last November’s Forex Magnates London Summit.
Algo Ai views the overall system as “medium frequency” and not of the “high frequency” type
At the heart of Also Ai’s product is Daisy, which manages the selection of thousands of strategies and to choose which ones are added to the money management account. The system is composed of strategies, managers, advisors, and Daisy. Explaining the hierarchy to Forex Magnates, Robert Johnson, Managing Partner, Algo Ai Strategies, stated that “Traders are the ones operating the strategies. Managers are managing these traders. Advisors manage the managers, and Daisy manages everything”.
the operation, Daisy reviews outperforming strategies for inclusion within the money management account. Scott Skinner, Co-CEO of Algo Ai Strategies stated that the strategies are algorithms developed by numerous traders. He explained that the main aspect of the algoritms is that they were formed to work in different market conditions. As a result, one of the main calculations Daisy compiles is to interpret the type of the market to choose the most fitting strategies for the current trading conditions. Skinner summarized this by stating that “The key for us is that the systems trades based on pure current market conditions so as long as we have algorithms for all changes in the market we can protect capital and create alpha.”
Once strategies are chosen, Daisy monitor’s the overall trading and conducts risk management based on predefined parameters such as daily drawdowns. The system also continues to monitor trading conditions, adding and removing strategies as it adjusts for performers in changing markets.
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Johnson explained that overall the system was built to trade numerous strategies simultaneously; thus causing it to be a large volume generator. Despite the volume of trades, Algo Ai views the overall system as “medium frequency” and not of the “high frequency” type with individual traders opened and closed in seconds. Also, as the system was built using a capital preservation model, there are no overnight positions, with, positions of individual strategies being closed at least daily.
After marketing their system primarily to retail investors, the system is being provided to brokers as a managed PAMM product. Algo Ai operates as the signal provider, which connects to PAMM software that brokers can connect individual traders. Due to the volume of trades, Johnson explained that the overall account is best traded in a PAMM structure as it best performs with a minimum of $250,000 which is well above the holdings of an individual customer. Presently, Algo Ai provides its strategies to brokers on a performance based license, collecting a percentage of revenues on trading profits from trades, with no volume based remuneration.
Currently, Daisy powered PAMM accounts are being offered through partnerships with Sensus Capital and IKON FX. Johnson added though that they are in various discussions with brokers and received a lot of demand from firms at the London Summit. Explaining what they believe is behind the demand, Johnson stated that an advantage of their system is that it is a volume generator for brokers, adding “the system is automated so it trades more than manual manager and can do more”.
Algo Ai isn’t alone in offering automated money manager products and copy trading to brokers. Recently launched products are iStrat from TickCom, SeerHub from SeerTrading and PAMM industry veteran Dmitry Orlov’s Strategy Store. These three, along with Algo Ai compete with the larger incumbents, Tradency and ZuluTrade that provide copy trading features for brokers to automate their client trading.
Among the competing products, iStrat is perhaps the most similar to Algo Ai’s Daisy. With both, customers aren’t choosing individual strategies, but the system automatically decides which algorithms to follow based on the market. In that regard, they can be considered more comparable to money management systems than copy trading software. Of the two, the major difference is that with iStrat, a separate platform is provided to customers, which provides them with greater control in fund allocation and risk management. In contrast, Algo Ai has developed their offering to be more focused on the user experience of the broker; thus allowing them to continue to use the PAMM software of their choice which they make available to their customers.