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I use a reverse signal to exit. Example: If the MA is positive I go long when the RSI (on the shorter scale) is lower than 20% and I get out when the RSI is greater than 80%. But you can experiment with it.

You can easily create and test such a system your self. Just use MA as your trend following technique and something like RSI as your counter trend entry/exit signal. You should use RSI on a shorter time frame though. You'll find everything you need to find.

No

I have been running a similar system with 5 contracts a trade through IB API. It is true that my system a little bit more complex and has logic for when to take market order vs limit. But all together I had around 80% of my limit orders filled during a test period of almost 1.5 years. You are...

Not true. I have been running a similar system with quite a success.

Thunder, you made me laugh again! Good man! :D :D

Juric indicator that is based on FIR filters is the ultimate solution.

Bang on!

OUTSTANDING! :D :D

Correlation presumes no time shift! Correlation is an integral of multiplied changes of two variable occurred at the same time.

Covariance is a statistical measure of the variance of two random variables that are observed or measured in the same mean time period. This measure is equal to the product of the deviations of corresponding values of the two variables from their respective means and does not contain any "NEW"...

There are by far better ways to achieve the same purpose. One of them is collar: - Long underlying, short call and long put - for your long bias and Short underlying, short put and long call for your short bias. You can design any protection level you want and achieve by far better returns...

If you are dealing with 50/50 probability then any product of any two variables with this probability will have the same (50/50) probability! More so, "predictability" as you were saying has nothing to do with pair trading it has everything to do with probabilities of individual stocks only as...

Ok! Gloves off! :) Correlation, as often experienced in the market, has a temporal lag to it. Not in a million years. We have analyzed Bid/Ask data for over 1000 stocks on 10 years of data. There is no tradable lag! Illusion, my friend! Often when you run macro analysis you find...

Lefty, I believe that you had a success with this particular spread. But you would have the same success with any stock that has volatility equal to the volatility of this spread. Except you paid lots of money to get this volatility. You had to hold two stocks with higher volatility to profit...

Take your example (Shell/BP). Can you plot a synthetic stock (BP - Shell) or (Shell - BP)? What you will see is a stock with less volatility! That is it! Nothing else. But you could find hundreds of stocks with the same volatility that as your synthetic stock. believe me, the result will be the...

There is no data on expired options.

Let's talk about this. Imagine you have 2 stocks that are correlated 100% - its like having one stock twice isn't it? So the spread does not exist. Now, let's have two stocks with the correlation of 90%. Yes, there is 10% more information in this pair but your profit potentials are...

Why?

Lost 18K. Congrats to the bulls.