The key foundation of Beach Horizon’s investment philosophy is that financial markets are not efficient and experience persistence in behaviour in the form of price trends. This can be explained by the influences of crowd behaviour and time delays for information to be absorbed into market prices. This causes markets to trend in many different time horizons and frequencies.
The key advantage of automated trading systems is that they can be designed to use information derived from price movements alone rather than having to interpret fundamental information. Price information is in a ready form for algorithmic analysis whereas fundamental information is not. Since price data is provided electronically, automated analysis of prices is possible.
The programme is able to generate returns by taking risk-adjusted long or short positions in response to price movements in order to profit from persistence in trending behaviour.