Formal Name: United Kingdom of Great Britain and Northern Ireland
Local Name: United Kingdom
Local Formal Name: United Kingdom of Great Britain and Northern Ireland
The United Kingdom and Systematic Trading
London is the home of modern systematic trend following outside the United States. AHL, founded in 1987 by Michael Adam, David Harding and Martin Lueck and later part of Man Group, became one of the largest trend following programs in the world. Its founders went on to build their own firms: David Harding started Winton Capital, and Martin Lueck co-founded Aspect Capital. Few cities have produced as many large systematic managers from a single starting point.
The United Kingdom also hosts the largest share of global foreign exchange trading of any country. Currency trends in sterling, the euro, the dollar and the yen are largely priced in London during the European business day. ICE Futures Europe lists Brent crude oil, UK gilt and short sterling interest rate futures, and FTSE 100 index futures, while the London Metal Exchange sets benchmark prices for copper, aluminum, zinc and nickel. A UK-based trader has the world’s energy, metals, rates and currency markets on the doorstep.
Sterling itself has produced some of the clearest currency trends of the last half century. In September 1992 the pound was forced out of the European Exchange Rate Mechanism, the episode remembered as Black Wednesday. In June 2016 the Brexit referendum result sent sterling sharply lower in a single session and lower still in the months that followed. In September 2022 a sell-off in gilts after the government’s mini-budget pushed sterling to a record low against the dollar. Each of these moves was a policy surprise to forecasters. To a trend follower each was simply a trend in the price.
For UK investors, a globally diversified systematic portfolio offers returns that do not depend on the FTSE 100, whose weighting toward banks, energy and mining companies ties it closely to a few sectors. Trend following on global futures markets draws its returns from trends in equity indices, bonds, currencies and commodities worldwide, which is the diversification a domestic equity portfolio lacks. UK traders who prefer not to use futures accounts often use spread betting instead; see spread betting and trend following.
The 30-minutes-per-day standard fits UK hours well. Greenwich Mean Time (UTC+0, British Summer Time UTC+1 in summer) places Asian closes before the UK working day begins, European and UK markets during it, and US futures closes in the evening. End-of-day signals for a global futures portfolio can be generated after the US close and orders placed before the next session opens.
Frequently Asked Questions
Why is London important to trend following?
Because some of the largest systematic trend following firms began there. AHL, founded in London in 1987 and later part of Man Group, trained the people who went on to found Winton Capital and Aspect Capital, among others. London is also the world’s largest foreign exchange trading center and home to ICE Futures Europe and the London Metal Exchange.
What sterling trends have systematic traders captured?
The pound’s exit from the European Exchange Rate Mechanism in 1992, its fall after the 2016 Brexit referendum, and its drop to a record low against the dollar in September 2022 all produced sustained moves. A trend following system does not need to predict the political cause of such a move. It responds to the price once the trend is underway.
Can UK investors trade trend following without a futures account?
Yes. Many UK traders use spread betting, which offers exposure to the same futures-based markets in a different account structure. The trend following rules, position sizing and risk control are the same whichever instrument is used.
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