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Fed in Focus - US Repo and Funds Rate

GO Markets
15/5/2023
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Fed in Focus - US Repo and Funds Rate During the week, it was all about the Repo market. A Repurchase Agreement known as Repo is a form of short-term borrowing for dealers in government securities. The Repo market plays a key role in supporting liquidity in the financial markets.

It facilitates the flow of cash and securities around the financial system which benefits both the financial and non-financial firms. Repo Market Explained In simple words, the Repo market consists of one party lending out cash in exchange for an equivalent value of securities to another party. The Borrower will, therefore, pay a fee to the Lender.

The securities being sold, which is often the Treasury notes are the collateral. Such transactions allow companies that own lots of securities but are short of cash to cheaply borrow money from parties that own lots of cash. As the collateral are government bonds, the risks are generally low.

US Borrowing Costs So ared On Tuesday, the Repo rate soared to record levels above 8% which is more than four times the normal rate. Even though the money market experienced a significant outflow on Friday ahead of the tax deadline, the sharp increase stunned investors and created fears of the abrupt tightening of the US money markets. There was another alarming signal as the surge in the Repo rate caused the average funds rate to rise to the upper end of the Fed’s current target range.

The Fed quickly intervened with a move it has not used in more than a decade and injected billions of dollars in the financial system to calm money markets. The move succeeded in bringing some relief and allowed the Repo rate to drop. The Fed further reassured market participants that it is willing to spend another $75 billion on Wednesday.

Bad Timing At a time where there are deep disagreements within the Federal Reserve over the path of interest rate outlook, the chaos in the repo markets complicated matters. Investors have priced-in a 25-basis point rate cut, but are uncertain about the future “dot plot”. The manufacturing sector is slowing, and trade tensions continue to overshadow the financial markets.

However, the consumer-orientated parts of the economy are holding up. Consumers remain one of the bright spots – Personal Consumption grew at a healthy pace in July. The employment sector also remains strong.

Hawkish Rate Cut This meeting will help traders to gauge how policymakers are assessing the recent economic data and the trade tariffs developments. There have been some sorts of a rethink in the markets regarding further easing. Do the current economic conditions justify more rate cuts?

At this stage, the economic data does not fully justify the second-rate cut, but the Fed will likely proceed with the cut as insurance against slowing growth due to external factors rather than a slowing domestic economy. Irrespective of how the Fed conveys its monetary outlook, the Fed is set to trigger high volatility!

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GO Markets

Os artigos são elaborados por analistas e colaboradores da GO Markets e baseiam-se na sua análise independente ou em experiências pessoais. As opiniões, pontos de vista ou estilos de negociação expressos são próprios dos autores e não devem ser considerados como representativos ou partilhados pela GO Markets. Qualquer conselho fornecido é de natureza “geral” e não leva em conta os seus objetivos, situação financeira ou necessidades pessoais. Antes de agir com base em qualquer conselho, considere se ele é apropriado para os seus objetivos, situação financeira e necessidades. Se o conselho estiver relacionado à aquisição de um produto financeiro específico, você deve obter a nossa Declaração de Divulgação (Disclosure Statement - DS) e outros documentos legais disponíveis no nosso site antes de tomar qualquer decisão.

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Where to for FY26 and beyond?

The ASX 200 closed out the 2025 financial year on a high, reaching a new intra-month peak of 8,592 in June and within touching distance of the all-time record. The index delivered a 1.4% total return for the month, rounding off a strong final quarter with a 9.5% return and locking in a full-year gain of 13.8% — its best performance since 2021.This strong finish all came down to the postponement of the Liberation Day tariffs. From the April 7 lows through to the end of the financial year, the ASX followed the rest of the world. Mid-cap stocks were the standout performers, beating both large and small caps as investors sought growth opportunities away from the extremes of the market. Among the sectors, Industrials outperformed Resources, benefiting from more stable earnings and supportive macroeconomic trends tied to infrastructure and logistics.But the clear winner was Financials, which contributed an incredible 921 basis points to the overall index return. CBA was clearly the leader here, dominating everything with 457 basis points on its own. Westpac, NAB, and others also played a role, but nothing even remotely close to CBA. The Industrials and Consumer Discretionary sectors made meaningful contributions, adding 176 and 153 basis points, respectively. While Materials, Healthcare, and Energy all lagged, each detracting around 45 to 49 basis points. Looking at the final quarter of the financial year, Financials were by far the biggest player again, adding 524 basis points — more than half the quarter’s total return of 9.5%. Apart from a slight drag from the Materials sector, all other parts of the market made positive contributions. Real Estate, Technology, and Consumer Discretionary followed behind as key drivers. Once again, CBA was the largest individual contributor, adding 243 basis points in the quarter, while NAB, WBC, and Macquarie Group added a combined 384 basis points. On the other side of the ledger, key underperformers included BHP, CSL, Rio Tinto, Treasury Wine Estates, and IDP Education, which all weighed on quarterly performance.One of the most defining features of the 2025 financial year was the dominance of price momentum as a market driver — something we as traders must be aware of. Momentum strategies far outpaced more traditional, fundamental-based approaches such as Growth, Value, and Quality. The most effective signal was a nine-month momentum measure (less the most recent month), which delivered a 31.2% long-short return. The more commonly used 12-month price momentum factor was also highly effective, returning 23.6%. By contrast, short-term reversals buying last month’s losers and selling last month’s winners was the worst-performing approach, with a negative 16.4% return. Compared to the rest of the world, the Australian market was one of the strongest trades for momentum globally, well ahead of both the US and Europe, despite its relatively slow overall performance.Note: these strategies are prone to reversal, and in the early days of the new financial year, there has been a notable shift away from momentum-based trading to other areas. Now is probably too early to say whether this marks a sustained change, but it cannot be ignored, and caution is always advised.The second big story of FY26 will be CBA. CBA’s growing influence was a key story of FY25. Its weight in the index rose by an average of 2.1 percentage points across the year, reaching an average of 11.5% by June. That helped push the spread between the Financials and Resources sectors to 15.8 percentage points — the widest gap since 2018. Despite the strong cash returns, market valuations are eye-watering; at one point during June, CBA became the world’s most expensive bank on price metrics. The forward price-to-earnings multiple now sits at 18.9 times. This is well above the long-term average of 14.7 and higher than the 10-year benchmark of 16.1. Meanwhile, the dividend yield has slipped to 3.4%, down from the historical average of 4.4%. Earnings momentum remains soft, with FY25 growth estimates still tracking at 1.4%, and FY26 forecast at a moderate 5.4%. This suggests that recent gains have come more from expanding valuation multiples than from actual earnings upgrades, making the August reporting date a catalyst day for it and, by its size, the market as a whole.On the macro front, attention now turns to the Reserve Bank of Australia. The central bank cut the cash rate by 25 basis points to 3.6% at its July meeting. Recent commentary from the RBA has taken on a more dovish tone, with benign inflation data and ongoing global uncertainty expected to outweigh the strength of the labour market. The RBA appears to be steering toward a neutral policy stance, and markets will be watching for further signals on how that shift will be managed. Recent economic data has been mixed. May retail sales were weaker than expected, while broader household spending indicators held up slightly better. Building approvals saw a smaller-than-hoped-for bounce, employment remains strong, but productivity is low. Inflation is now at a 3-year low and falling; all this points to underlying support from the RBA’s easing bias both now and into the first half of FY26.As we move into FY26, the key questions are:

  1. Can fundamentals wrestle back control over momentum?
  2. Will earnings growth catch up to price to justify valuations?
  3. How will policy decisions from the RBA and other central banks shape investor sentiment in an ever-volatile world?

While the early signs suggest a possible rotation, the jury is still out on whether this marks a new phase for the Australian market or just a brief pause in the rally that defined FY25.

Evan Lucas
•
July 8, 2025
Central Banks
Featured
3 Key Takeaways From the June FOMC Meeting

1. Inflation Uncertainty

While recent data has shown core inflation moderating, core PCE is on track to average below target at just 1.6% annualised over the past three months.Federal Reserve Chair Jerome Powell made clear that concerns about future inflation, especially from tariffs, remain top of mind.“If you just look backwards at the data, that’s what you would say… but we have to be forward-looking,” Powell said. “We expect a meaningful amount of inflation to arrive in the coming months, and we have to take that into account.”While the economy remains strong enough to buy time, policymakers are closely monitoring how tariff-related costs evolve before shifting policy. Powell also stated that without these forward-looking risks, rates would likely already be closer to the neutral rate, which is a full 100 basis points from current levels.

2. The Unemployment Rate anchor

Powell repeatedly cited the 4.2% unemployment rate during the press conference, mentioning it six times as the primary reason for keeping rates in restrictive territory. At this level, employment is ahead of the neutral rate.“The U.S. economy is in solid shape… job creation is at a healthy level,” Powell added that real wages are rising and participation remains relatively strong. He did, however, acknowledge that uncertainty around tariffs remains a constraint on future employment intentions.If not for a decline in labour force participation in May, the unemployment rate would already be closer to 4.6%. Couple this with the continuing jobless claims ticking up and hiring rates subdued, risks are building around labour market softening.

3. Autumn Meetings are Live

While avoiding firm forward guidance, Powell hinted at a timeline:“It could come quickly. It could not come quickly… We feel like the right thing to do is to be where we are… and just learn more.”This suggests the Fed will remain on hold through the July meeting, using the summer to assess incoming data, particularly whether tariffs meaningfully push inflation higher. If those effects prove limited and unemployment begins to rise, the stage could be set for a rate cut in September.

Evan Lucas
•
June 24, 2025
Central Banks
Featured
Get ready for volatility: January core PCE

This coming Friday sees the January core PCE inflation data – the Fed’s preferred measure of inflation. Now most are forecasting that it should confirm that inflation has eased compared to this time last year. The consensus estimate has the monthly increase at 0.2 per cent with the annual rate at 2.5 per cent.

Now that is premised on a range of factors, they are also based on the fact the newly installed administration was not in power when these numbers were being collated. For now then – here are the key issues of the PCE read this Friday: Inflation Expectations: A temporary blip? Or is this the ‘transitory v structural debate again? – Upside impactor Several surveys are showing some upward movement in price expectations, mainly down to tariffs and other new external impacts.

Most don’t see this as a sign of a new inflationary trend but that is cold comfort considering how wrong these forecasts have been over the past three years. Case in point here is the University of Michigan’s 5 to 10 year inflation expectations which jumped to 3.5 per cent in February release, highest of this cycle. The caveat is that while this figure is high, historically this read has run above actual inflation, even when inflation was stable at 2 per cent, even so – a 1.5 per cent miss seems way out and even a 2.8 to 2.9 per cent read would be an issue for further cuts and the current US inflation story.

Other things to keep in mind: Tariffs were front and centre in February and clearly remain a political and geopolitical risk/threat. It should die down in the coming weeks as the administration settles in, the news cycle moves and the size of the tariffs retreat – that is until something causes the President to react. But March should be quieter – but the year will be volatile.

Countering the University of Michigan survey is the New York Fed’s, which hasn’t shown a major shift. If the increase in expectations were widespread, this would move the dial and would be more concerning. It makes the NY Fed data all the more interesting ahead of its launch.

We should also point out February’s manufacturing PMI showed rising input and output prices, while service sector price indices eased – why? Tariffs. This aligns with the 10% tariffs on Chinese imports that kicked in earlier this month.

With 25% steel and aluminium tariffs set for March 12, some price pressures may persist in March. Used Car Prices: A Temporary Divergence? – Down side impactor Used car prices in CPI have been running hotter than expected, especially relative to wholesale prices, which typically lead by a few months. And, this even after the surge in used car prices during the COVID era.

This market has remained above trend but is easing a Manheim wholesale used car prices fell 1.1 per cent month on month in early February, reinforcing our view that CPI inflation in this category has limited room to rise. If consumer demand were truly driving higher prices, we’d expect to see wholesale prices moving up as well which hasn’t happened. New York Congestion Pricing: Is this one and done?

A big policy pitch from the President for the state of New York was the congestion charging throughout New York City. True to its word the Trump administration revoked approval for congestion pricing in New York City, which had gone into effect in early January. This is likely to be the reason for the 2.6 per cent month on month spike in motor vehicle fees within CPI.

If the fee is ultimately scrapped, we’d expect an equivalent pullback in this CPI category. But with legal challenges keeping the fee in place for now – it was a double hit. One to watch.

Housing & Shelter: Watching LA Zillow’s single-family rent index rose 0.33 per cent month on month in January, consistent with shelter inflation continuing to slow – but still growing above historical averages. However it is not even across the country - Los Angeles rents spiked 1 per cent month on month - the biggest monthly jump since early 2022. The recent fires may have played a role, and if this strength persists, we could see upward pressure on shelter inflation later this year.

Median home prices remained flat in January, and with the broader housing market cooling, long-term upside risk to shelter inflation remains limited. In short, this Friday’s PCE is going to a line ball read – any hit that inflation is continuing to defy expectations as it has since September, the Fed will be dealt out of the rate market in 2025 and the USD, US bonds and risk exposures with debt are going to see reasonable movements. Which brings us to the other elephant in the market trading room – Tariffs on silver things.

Tariff Changes on Steel and Aluminium: Who really pays? We have been reluctant to write about the steel and aluminium tariffs that were announced on February 11. The Trump administration confirmed its plan to reinstate full tariffs on imported steel and aluminium—a move that will significantly impact both industries and consumers.

These tariffs are scheduled to start in early March, these Section 232 import tariffs will impose a 25% duty on steel and aluminium products, with aluminium tariffs rising from the previous 10% to 25%. Right now every nation on the planet (including Australia) is in Washington trying to wiggle their way out of the impending price surge – so far there is radio silence from the administration on if it will budge on any of the changes. Memory Lane If we take the 2018 tariffs as a guide, history suggests that once domestic stockpiles are depleted and buyers turn to global markets, U.S. prices will likely rise to reflect most of these duties.

However, exemptions may still be granted, particularly for aluminium, where the U.S. depends heavily on imports about 85% of aluminium consumption comes from overseas. While U.S. importers will bear roughly 80% of the tariff costs, exporters may need to lower prices to remain competitive—assuming they can’t find better pricing in other markets. Other things to be aware of from a trading point of view - The U.S. imports ~ 70 per cent of its primary aluminium Canada.

Who is the biggest play in that Canadian market? Rio Tinto. And it's not just Canada Rio Tinto ships approximately 1.75 million tonnes of aluminium annually from Canada and Australia.

Nearly 45 per cent of Rio Tinto’s U.S. aluminium sales are value-added products, which carries a premium of $200-$300 per tonne over London Metal Exchange (LME) prices. That is something that very much irks the President. Couple this with the fact physical delivery in the U.S. is also at a premium price and that gives you an average price estimate that could rise by ~40 per cent to approximately $1,036 per tonne ($0.50/lb), up from the 2024 average of $427 per tonne.

The thing is Rio Tinto itself is forecasting strong demand in North America, and its Value-add pricing is unlikely to change as domestic suppliers can’t easily replace the volumes it needs. In short, price pressure is coming – and suppliers will likely win out over the consumer. So what about Steel?

The U.S. imports 25-30 per cent of its steel so it’s not as reliant on this product as aluminium, but 80 per cent of those imports are currently exempt under Section 232 which is about to scrap it. That means the tariffs will impact around 18 million tonnes of steel imports annually, with: 35-40 per cent being flat products, 20-25 per cent semi-finished steel, and the rest covering long steel, pipes, tubes, and stainless steel. The Trump administration has signalled concerns over semi-finished steel imports, particularly Brazilian slab imports (~3-4 million tonnes per year).

What Does This Mean for Steel Prices? All things being equal - U.S. domestic steel prices will rise in full alignment with the 25% tariff on affected imports. The short and tall of it For both steel and aluminium, the reintroduction of tariffs means higher prices for U.S. buyers, particularly once inventories run down and imports reflect the new duty rates.

While exemptions remain a possibility, businesses reliant on imported metals should prepare for cost increases and potential supply disruptions. Traders should be ready for volatility, margin changes and erratic conditions as the administration rages over pricing issues.

Evan Lucas
•
February 26, 2025
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Trading strategies
How to Build a Balanced EA Portfolio

Most traders understand EA portfolio balance through the lens of traditional risk management — controlling position sizes, diversifying currency pairs, or limiting exposure per trade.

But in automated trading, balance is about deliberately constructing a portfolio where different strategies complement each other, measuring their collective performance, and actively managing the mix based on those measurements.

The goal is to create a “book” of EAs that can help diversify performance over time, even when individual strategies hit rough patches.

A diversified mix of EAs across timeframes and assets can, in some cases, reduce reliance on any single strategy. This approach reduces dependency on any single EA’s performance, smooths your overall equity curve, and builds resilience across changing market conditions.

It’s about running the right mix, identifying gaps in your coverage, and viewing your automated trading operation as an integrated whole rather than a collection of independent systems.

Basic Evaluation Metrics – Your Start Point

Temporal (timeframe) Balancing

When combined, a timeframe balance (even on the same model and instrument) can help flatten equity swings.

For example, a losing phase in a fast-acting M15 EA can often coincide with a profitable run in an H4 trend model.

Combining this with some market regime and sessional analysis can be beneficial.

Asset Balance: Managing Systemic Correlation Risk

Running five different EAs on USDJPY might feel diversified if each uses different entry logic, even though they share the same systemic market driver.

But in an EA context, correlation measurement is not necessarily between prices, but between EA returns (equity changes) relating to specific strategies in specific market conditions.

Two EAs on the same symbol might use completely different logic and thus have near-zero correlation.

Conversely, two EAs on a different symbol may feel as though they should offer some balance, but if highly correlated in specific market conditions may not achieve your balancing aim.

In practical terms, the next step is to take this measurement and map it to potential actionable interventions.

For example, if you have a EURUSD Trend EA and a GBPUSD Breakout EA with a correlation of 0.85, they are behaving like twins in performance related to specific market circumstances. And so you may want to limit exposure to some degree if you are finding that there are many relationships like this.

However, if your gold mean reversion EA correlates 0.25 compared to the rest of your book, this may offer some balance through reducing portfolio drawdown overlap.

Directional and Sentiment Balance

Markets are commonly described as risk-on or risk-off. This bias at any particular time is very likely to impact EA performance, dependent on how well balanced you are to deal with each scenario.

You may have heard the old market cliché of “up the staircase and down the elevator shaft” to describe how prices may move in alternative directions. It does appear that optimisation for each direction, rather than EAs that trade long and short, may offer better outcomes as two separate EAs rather than one catch-all.

Market Regime and Volatility Balance

Trend and volatility states can have a profound impact on price action, whether as part of a discretionary or EA trading system. Much of this has a direct relationship to time of day, including the nature of individual sessions.

We have a market regime filter that incorporates trend and volatility factors in many EAs to account for this. This can be mapped and tested on a backtest and in a live environment to give evidence of strategy suitability for specific market conditions.

For example, mean reversion strategies may work well in the Asian session but less so in strongly trending markets and the higher volatility of the early part of the US session.

As part of balancing, you are asking questions as to whether you actually have EA strategies suited to different market regimes in place, or are you using these together to optimise book performance?

The table below summarises such an approach of regime vs market mapping:

Multi-Level Analysis: From Composition to Interaction

Once your book is structured, the challenge is to turn it into something workable. An additional layer of refinement that turns theory and measurement into something meaningful in action is where any difference will be made.

This “closing the circle” is based on evidence and a true understanding of how your EAs are behaving together. It is the step that takes you to the point where automation can begin to move to the next level.

Mapping relationships with robust and detailed performance evaluation will take time to provide evidence that these are actually making a difference in meeting balancing aims.

To really excel, you should have systems in place that allow ongoing evaluation of the approaches you are using and advise of refinements that may improve things over time.

What Next? – Implementing Balance in Practice

Theory must ultimately translate into an executable EA book. A plan of action with landmarks to show progress and maintain motivation is crucial in this approach.

Defining classification tags, setting risk weights, and building monitoring dashboards are all worth consideration.

Advanced EA traders could also consider a supervisory ‘Sentinel’ EA, or ‘mothership’ approach, to enable or disable EAs dynamically based on underlying market metrics and external information integrated into EA coding decision-making.

Final Thoughts

A balanced EA portfolio is not generated by accident; it is well-thought-out, evidence-based and a continuously developing architecture. It is designed to offer improved risk management across your EA portfolio and improved trading outcomes.  

Your process begins with mapping your existing strategies by number, asset, and timeframe, then expands into analysing correlations, directional bias, and volatility regimes.

When you reach the stage where one EA’s drawdown is another’s opportunity, you are no longer simply trading models but managing a system of EA systems. To finish, ask yourself the question, “Could this approach contribute to improved outcomes over time?”. If your answer is “yes,” then your mission is clear.

If you are interested in learning more about adding EAs to your trading toolbox, join the new GO EA Programme (coming soon) by contacting [email protected].

Mike Smith
•
October 16, 2025
Automated Trading
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General Trading Info
Psychology
Beyond the Code: 8 Standards for Automated Trading

The rise of algorithmic trading has made it possible for traders of all levels to execute trades with precision and discipline 24/7. 

However, while algorithms, such as Expert Advisors (EAs) used on MT4or MT5, remove emotion from the execution, they cannot remove the human element from trading. 

The psychological challenges may be different when using EAs than those facing the discretionary trader, but challenges still exist.

Every automated strategy reflects the trading beliefs, thinking, logic, and discipline of its creator. This is true in development and in a live environment.

The “code” in EA trading should mean more than lines of MQL5. It should be based on a code of conduct that defines the standards by which you operate.

In a world where automation can amplify both success and mistakes, a structured set of principles helps ensure EAs remain a tool for improvement, not a shortcut to risk.

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1. Use EAs as Trading Tools, Not Replacements for Good Practice

EAs are instruments, tools of the trade, not a replacement for skill, judgment, or responsibility. Their role is to supplement a trader’s edge, not substitute for it.

For example, a swing trader who relies on price-action patterns might automate only specific entry conditions to ensure consistency, while continuing to manage exits manually. 

Conversely, a systematic trader may automate the entire process but still monitor performance against broader market regimes as a filter for entering or exiting automated trades. 

Before an EA is ever switched on, traders must ask: What problem is this solving for me? Is it improving my execution discipline, making sure I miss fewer trading opportunities, or helping me diversify and trade efficiently across multiple markets? 

Automation magnifies intent and thoroughness in peroration, execution and system refinement. If your answer is simply “to make money while I sleep,” the foundation is not enough, and perhaps you should look a little deeper.

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2. Design with Clarity and Thoroughness

The design phase is where your EA professionalism begins. Every EA must be built on a clear, rules-based logic that matches the trader’s intent and desire to take advantage of specific price action. 

In practice, this means you need to define exactly what the EA is supposed to do from the outset and, equally, what it will not do.

Integrity in design means documenting your logic before you code it. Write out the concept in plain language.

“Enter long when a bullish engulfing candle forms above the 20 EMA during the London session.”

“Exit when RSI crosses below 70 or after two ATRs in profit.”

Once defined, those conditions become the contract between the trader and the code. 

Whether you are attempting to code yourself, using a third party to code for you or even using an off-the-shelf EA, ambiguity or lack of clarity should be addressed. 

Without this, there will always be a temptation to shift or a failure to recognise the need for refinement.

‍

3. Test with Transparency

Backtesting is often where enthusiasm overtakes discipline. It’s easy to be seduced by an impressive equity curve, yet testing is only valuable when it’s transparent.

Successful EA traders will often treat every backtest as additional data, not exclusive hard validation that an EA definitely perform in a live market environment. 

They record settings, market conditions, and measure key metrics, saving results journal and different versions. This allows an objective comparison and sets the foundations for what should be measured on an ongoing basis.

Transparency also means using realistic conditions — spreads, slippage, and ticks rather than OHLC for final testing, all provide a greater quality of metrics that may more accurately mirror live trading. 

A good practice is to maintain a “testing log” alongside the EA code. For example:

  • Version number
  • The purpose of the test (e.g., confirm logic or optimise ATR period for setting stop or take profit levels)
  • The conditions under which it was run, including underlying market conditions and arguably directional and sessional differences.
  • The interpretation of results (what was learned, not just the numbers)

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4. Avoid the Illusion of Certainty

The temptation to fine-tune parameters until a backtest looks flawless is a trap known as overfitting. 

It produces systems that may often perform brilliantly on historical data but collapse in a heap in live markets, where other external variables can be equally, if not more influential.

The necessity for and rigour and robustness in testing include approaches such as: 

  • Forward testing: Running the EA on new data to confirm behaviour.
  • Walk-forward analysis: Re-optimising in rolling segments to ascertain whether there is parameter stability.
  • Parameter clustering: Checking if profitability holds across a range of values rather than one precise setting. E.g., it will still be profitable if a level of partial close is 40, 50 or 60% of your position.

A robust EA trader accepts uncertainty as reality. A recognition that markets can evolve, conditions often shift, and no single setting is likely to remain optimal forever. 

Your goal is durability, not perfection in a single set of market conditions.

An EA that performs moderately well across different conditions is often far more valuable than one that looks brilliant in backtest isolation.

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5. Adequate Preparation for Live Execution

The transition from backtest to live trading is not something to take lightly; it is a major operational step. Before going live, traders should have a checklist covering readiness that includes confirmation of logic, appropriate infrastructure, and management of risk.

Steps to achieve this aim can include:

  • Running the EA in visual backtest mode to confirm correct trade placement.
  • Checking symbol specifications, such as contract size, margin requirement, and swap cost.
  • Confirming VPS stability — low latency, sufficient processing power for the number of EAs you are trading, and reliability
  • Testing on a demo account first, under live market conditions and then move to a live environment using minimum trading volume before scaling.

EA traders should have a set of minimum values for key metrics such as Net profit vs balance drawdown, win rate, consecutive wins and losses and Sharpe ratios before moving to live. 

A full checklist that incorporates minimum testing performance as well as infrastructure management is critical. 

‍

6. Manage Risk is About You, Not Your EA

The most dangerous misconception in automated trading is that the EA “handles risk.” It does not. It simply executes your instructions, whether these are good or bad for a particular trade.

As a trader, you remain responsible for every lot size, margin call, and equity swing. Proper capital management means understanding total exposure across all running EAs as a whole, not just an individual one.

Running five EAs, of which risks 1% of account equity per trade is not necessarily diversification, particularly if the assets are heavily correlated.

In the same way that you should be rigorous in decision-making from test to live environment, it is equally important when scaling, i.e., increasing trading lot sizes.

Scaling rules should be data-based and only considered after a defined critical mass of trading activity of a single EA. Only increasing trade size when the EA’s equity curve maintains a positive slope over a rolling period, or when the profit factor exceeds a set threshold for a given number of trades.

Once scaling is taking place beyond the minimum volume, it may be worth considering the implications of the reality that risk is dynamic. 

Experimenting with adjusting lot size against the strength of the signal or underlying market conditions for specific EAs may be worthwhile.

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7. Monitor, Measure, and Refine

A live EA is not a “set-and-forget” machine. It’s a continuous process that requires observation and refinement on an ongoing basis

Regular and planned reviews of EA performance through appropriate reporting will always reveal valuable insights beyond your overall account balance. Aim to answer questions such as:

  • Is the EA behaving as designed?
  • Are trade times and volumes consistent with expectations?
  • Has the average profit per trade decreased, suggesting a changing market structure?

A disciplined EA trader will use these insights to decide when to pause, adjust, or retire an EA. For instance, if a breakout EA consistently loses during low-volatility sessions, the solution might not be “optimise again” but to restrict trading hours within the parameters.

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8. Maintain Operational Discipline

Even the best logic fails if your trading environment is unstable or unsuitable. Operational discipline ensures that the infrastructure supporting EAs is reliable, secure, and constantly monitored for any “events” that may influence the execution of your book of EAs.

This includes maintaining a properly configured VPS (Virtual Private Server) with sufficient CPU capacity and regular monitoring of resource use.

Traders should track activity, confirming that log files are saving correctly, and not only know how to install their EA to trade live (and other files that may be necessary for it to run, e.g., include files) but also how to restart or stop an EA without disrupting open trades.

Operational discipline also extends to record-keeping and organisation of your automated trading performance evaluations and resources. Notes on anything that looks unusual for further review, and systems that dictate when you take actions, are all part of putting the right things in place.

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Final Thoughts 

Your Code of Conduct for EA Traders is not a rulebook but a roadmap for moving towards excellence in the design, deployment, and management of automated trading systems.

Although each standard can stand alone as something specific to work on, they are also inextricably linked to the whole. 

View your automated trading as an extension of who you are and want to become as a trader. An EA can execute your edge, but it cannot replace your accountability for actions, your need for learning and improvement, nor your commitment towards better trading outcomes.

The best traders don’t just build and use algorithms; they build standards of practice and follow through to move towards becoming a successful EA trader.

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Mike Smith
•
October 9, 2025
Featured
Geopolitical events
U.S. Government Shutdown 2025: What Traders Need to Know

The United States entered a government shutdown on October 1, 2025, after Congress failed to agree on full-year appropriations or a short-term funding bill. Although shutdowns have occurred before, the timing, speed, scale, and motives behind this one make it unique. This is the first shutdown since the last Trump term in 2018–19, which lasted 35 days, the longest in history.For traders, understanding both the mechanics and the ripple effects is essential to anticipating how markets may respond, particularly if the shutdown draws out to multiple weeks as currently anticipated.

What Is a Government Shutdown?

A government shutdown occurs when Congress fails to pass appropriation bills or a temporary extension to fund government operations for the new fiscal year beginning October 1.Without the legal authority to spend, federal agencies must suspend “non-essential” operations, while “essential” services such as national security, air traffic control, and public safety continue, often with employees working unpaid until funding is restored.Since the Government Employee Fair Treatment Act of 2019, federal employees are guaranteed back pay to cover lost wages once the shutdown ends, although there has been some narrative from the current administration that some may not be returning to work at all.

Why Did the Government Shutdown Happen?

The 2025 impasse stems from partisan disputes over spending levels, health-insurance subsidies, and proposed rescissions of foreign aid and other programs. The reported result is that around 900,000 federal workers are furloughed, and another 700,000 are currently working without pay.Unlike many past standoffs, there was no stopgap agreement to keep the government open while negotiations continued, making this shutdown more disruptive and unusually early.

Why an Early Shutdown?

Historically, most shutdowns don’t occur immediately on October 1. Lawmakers typically kick the can down the road with a “Continuing Resolution (CR)”. This is a stopgap measure that can extend existing funding for weeks or months to allow time for an agreement later in the quarter.The speed of the breakdown in 2025, with no CR in place, is unusual compared to past shutdowns. It suggests it was not simply budgetary drift, but a potentially deliberate refusal to extend funding.

Alternative Theories Behind the Early Shutdown

While the main narrative coming from the U.S. administrators points to budget deadlock, several other theories are being discussed across the media:

  • Executive Leverage – The White House may be using the shutdown as a tool to increase bargaining power and force structural policy changes. Health care is central to the debate, funding for which was impacted significantly by the “one big, beautiful bill” recently passed through Congress.
  • Hardline Congressional Factions – Small but influential groups within Congress, particularly on the right, may be driving the shutdown to demand deeper cuts.
  • Political Messaging – The blame game is rife, despite the reality that Republican control of the presidency, House, and Senate, as well as both sides, is indulging in the usual political barbs aimed at the other side. As for the voter impact, Recent polls show that voters are placing more blame on Republicans than Democrats at this point, though significant numbers of Americans suggest both parties are responsible
  • Debt Ceiling Positioning – Creating a fiscal crisis early could shape the terms of future negotiations on borrowing limits.
  • Electoral Calculus – With midterms ahead, both sides may be positioning to frame the narrative for voters.
  • Systemic Dysfunction – A structural view is that shutdowns have become a recurring feature of hyper-partisan U.S. politics, rather than exceptions.

Short-Term Impact of Government Shutdown

AreaImpactFederal workforceHundreds of thousands have been furloughed with reduced services across various agencies.Travel & aviationFAA expects to furlough 11,000 staff. Inspections and certifications may stall. Safety concerns may become more acute if prolonged shutdown.Economic outputThe White House estimates a $15 billion GDP loss per week of shutdown (source: internal document obtained by “Politico”.Consumer spendingFederal workers and contractors face delayed income, pressuring local economies. Economic data releaseKey data releases may be delayed, impacting the decision process at the Fed meeting later this month.Credit outlookScope Ratings and others warn that the shutdown is “negative for credit” and could weigh on U.S. borrowing costs.Projects & researchInfrastructure, grants, and scientific initiatives are delayed or paused.

Medium- to Long-Term Impact of Government Shutdown

1. Market Sentiment

Shutdowns show some degree of U.S. political dysfunction. They can weigh on confidence and subsequently equity market and risk asset sentiment. To date, markets are shrugging off a prolonged impact, but a continued shutdown into later next week could start to impact.Equity markets have remained strong, and there has been no evidence of the frequent seasonal pullback we often see around this time of year.Markets have proved resilient to date, but one wonders whether this could be a catalyst for some significant selling to come.

2. Borrowing Costs

Ratings downgrades could lift Treasury yields and increase debt-servicing costs. The Federal Reserve is already balancing sticky inflation and potential downward pressure on growth. This could make rate decisions more difficult.

3. The Impact on the USD

Rises in treasury yields would generally support the USD. However, rising concerns about fiscal stability created by a prolonged shutdown may put further downward pressure on the USD. Consequently, it is likely to result in buying into gold as a safe haven. With gold already testing record highs repeatedly over the last weeks, this could support further moves to the upside.

4. Credibility Erosion

Repeated shutdowns weaken the U.S.’s reputation as the world’s most reliable borrower. With some evidence that tariffs are already impacting trade and investment into the US, a prolonged shutdown could exacerbate this further.

What Traders Should Watch

For those who trade financial markets, shutdowns matter more for what they could signal both in the short and medium term. Here are some of the key asset classes to watch:

  • Equities: Likely to see volatility as political risk rises, and the potential for “money off the table” after significant gains year-to-date for equities.
  • U.S. Dollar: With the US dollar already relatively weak, further vulnerability if a shutdown feeds global doubts about U.S. fiscal stability.
  • Gold and other commodities: May continue to gain as hedges against political and credit risk. Oil is already threatening support levels; any prolonged shutdown may add to the bearish narrative, along with other economic slowdown concerns
  • Outside the US: With the US such a big player in global GDP, we may see revisions in forward-looking estimates, slingshot impacts on other global markets and even supply chain disruptions with impact on customs services (potentially inflationary).

Final Word

The 2025 shutdown is unusual because of its scale and because it started on Day 1 of the fiscal year, without even a temporary extension. That speed points to a deeper strategic and political contribution beyond the usual budget wrangling that we see periodically.For traders, the lesson is clear: shutdowns are not just what happens in Washington, but may impact confidence, borrowing costs, and market sentiment across a range of asset classes. In today’s world, where political credibility is a form of capital, shutdowns have the potential to erode the very foundation of the U.S.’s role in global finance and trade relationships.

Mike Smith
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October 3, 2025
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