Typhon Capital Management, LLC : Arion Financials Program

Summary

The Arion Financials Program is an intra-day trading program that seeks to capture short- to intermediate-term market directional trends in highly liquid financial and currency futures markets. Arion is a fully systematic, quantitative system designed to identify trading opportunities in both trending and choppy markets. The system maintains well-defined, disciplined risk management thresholds, and includes sophisticated filters designed to limit trade execution to statistically optimal trades while avoiding market noise. Arion maintains disciplined cash management procedures, including a sub-system that suspends trading in specific instruments that experience specific drawdown limits until the system retraces defined retracement levels.

Investment Strategy

The Arion Financials Program seeks to capture directional market moves in both trending and trading-range market environments. Operating within well-defined risk management thresholds, its sub-strategies execute statistically optimal trades while avoiding market “noise.” Arion aims to achieve returns surpassing CTA and Hedge Fund indices using low leverage and non-correlated sub-strategies. Arion employs trend indicators, such as moving averages and standard deviations which are used to identify intermediate and long term trends of the instrument being traded. Within these trends, long and short trade entry triggers are achieved at certain price levels and confirmed by proprietary algorithms and indicators. The system’s models are highly selective resulting in relatively few trades and periods with no market exposure. Breakout and volatility trades are both utilized, as well. These trades are determined based on the strength of price signals and other derived factors.

Risk Management

Arion uses prudent money management principles. Hard trailing stops are entered at the time a trade is initiated. As positions work in the trade’s favor, trailing stops are rolled in favor of the trade, reducing risk as the trade matures. Multiple profit targets are employed so that initial profit targets provide some level of profitability, and additional profit targets attempt to capture larger moves. Trade executions are automated to ensure rapid entry and exit of trades as price levels are achieved. Position management and trading rules used by the system prescribe that a pre-set percent of equity (e.g. 1%) is risked on any given trade. Trailing stops are used to ensure losing trades are quickly exited and to capture profitable trades at optimal points. If a succession of losing trades in a given instrument reach a defined drawdown percentage level, trading is suspended in the instrument. Trading in the instrument will resume upon reaching a defined retracement level. The system dynamically scales the amount of capital deployed based on liquidity and volatility. Arion closes all positions before each day’s close and uses no overnight margin.