Reverse-Engineering Algorithmic Trading Activity

Oct. 19, 2023 - 1 minute 30 seconds

In this exclusive bonus segment following his appearance on MoneyTalk Live, Daniel Ghali, senior commodity strategist, TD Securities, speaks further with the host, Greg Bonell, to offer unique insight on algorithmic traders. He explains how systemic trend followers are now dominating speculative trading activity in commodities markets following an extinction-level event for traditional funds. Daniel also discusses forecasting the actions of the largest commodity trading advisors (CTAs) to better understand the flows behind underlying market trends. Paying attention and adapting to the strategies employed by CTAs can be invaluable when predicting what might be happening next.

Key Takeaways

  • Three major developments driving global markets for the last decade include the proliferation of algorithmic trend-following strategies, risk-parity portfolios and dealer gamma hedging.
  • Approximately 70% of transactions in futures markets are now driven by a machine; although about half are transacted by high-frequency traders, these contribute minimally to directional flows.
  • The bulk of the remaining of machine transactions is driven by momentum-chasing CTA trend followers which can exacerbate market movements.
  • Reverse engineering the positions held by the average CTA in order to estimate what assets are being bought or sold by this cohort on a given day.
  • Market fundamentals can be a catalyst for a change in trend, but CTA trend follower activity now frequently contributes to overshooting price action. Recently, the run-up of oil prices was initiated by tightening oil supply from Saudi Arabia and Russia, but ultimately extended by CTA trend follower buying activity.

This episode was recorded on October 5, 2023. Watch the full episode featuring Daniel Ghali discussing commodities and the global economy on MoneyTalk Live.

Subscribing clients can access the Advanced CTA Position Tracker report on the TD Securities Market Alpha Portal

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Portrait of Daniel Ghali


Senior Commodity Strategist, TD Securities

Portrait of Daniel Ghali


Senior Commodity Strategist, TD Securities

Portrait of Daniel Ghali


Senior Commodity Strategist, TD Securities

Daniel is a Commodity Strategist for TD Securities in the FICC Strategy group, based in Toronto. He provides research and market analysis of precious metals, base metals, and energy markets, used in producing trading strategies that are disseminated to the institutional trading desks in Toronto, New York, London and Singapore, along with the broader client base. He is well known for his Quantamental approach, which has allowed him to develop data-driven tools, bespoke insights and tactical trading strategies across global markets. Daniel has the conviction to recommend bold views when opportunities warrant and has built a track record of providing sobering insights. Daniel holds a Masters in Business Administration from the University of Toronto, and is also a CFA charterholder.