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Backtesting report.

Yes Im on their beta testing list, just send an email to them requesting to be placed on the list. They give you a special link to download the lastest update from. Pretty cool the new % from the mean feature, shows the profit potential of each trade and how far in % terms the pair is currently...

Time based exits are good imo. You have to prove the case for using a stop loss, for example if you buy a stock and have a stop loss to sell it when it goes down 5% you have test that as a system in its own, sell a stock when it goes down 5% after your signal, if trading that in itself isn't...

Thanks for the comments guys, well done mlsignups on your results too. Closed trade for profit Sold ACGL @ 56.06 Covered ACE @ 43.99 New trades Long MGG @ 18.85 Short TPP @ 26.12 Long TMK @ 26.28 Short MET @ 28.20

Not sure I understand what your saying here, if infrequent big losses were an issue it would show up in the drawdown thus lowering the sharpe ratio, otherwise if it doesn't cause a big drawdown what is the point of identifying it? I find it to be a good indication of risk-adjusted returns since...

Filters are; 1) unique industry-only pairs 2) correlation above 80% and rising 3) non-trending ratio chart and good distance between ratio and avg ratio 4) spread near 50 day high if im bearish the spread and vice versa if im bullish Equity curve attached.

As per several requests Id thought Id do a performance update. Start of journal: 18th August, 2008 Cut off date: 22nd April, 2009 Return: 93.73% Annualized: 139.89% Biggest Drawdown: 8.9% SP500 Return: -33.4% Outperformance: 127.13% Using a generous risk free rate of return of 3% my...

Dr Who I can't comment on the portfolio mgmt feature, I didn't like it either and Ive been using a spreadsheet the whole time to record trades and that works fine.

Exited trade for profit Sold MGG @ 19.68 Covered ETE @ 24.18 Il do an performance update next week, going out now, have a great weekend everyone.

Yes your right Don, im showing low correlation aswell, don't know how I missed that, first time Ive done that, anyway no biggie. Closed a trade for nice profits Sold PUK @ 12.00 Covered AXA @ 15.52 2nd time in the last month Ive made good profits on this pair, maybe time to slip back...

I think fundamentals are only necessary if your average trade length is greater than a month, since most of us are only holding trades for several days its not relevant imo, although it wouldn't hurt being on the right side of the fundamentals. New trade Long CMP @ 49.77 Short SYT @ 41.88

Yes I guess its a matter of opinion, to me it all looks fine, ranging ratio chart, spread at 50 day lows, 2.3 stdevs from the mean. Of course ive been wrong before, trade by trade results don't matter though. New trades Long IP @ 7.22 Short BKI @ 3.11 Long MGG @ 18.02 Short ETE @...

thanks keops, would be good if there were an ECN broker with capped spreads, ECNs have low spreads but they can quickly increase, you wouldn't want to enter with a spread of 3pips, then when a exit signal is given you get screwed with a 7pip spread...

Can someone please tell me what the current spread is on eur/gbp and eur/chf in TWS(interactive brokers) or what the typical spread on these currencies in the asian session is, any help is appreciated, Jonny.

Yes your right Walt thanks for pointing that out, I did a typo, ACE and ACGL are in the wrong lines, suppose to be; Long ACGL @ 59.16 Short ACE @ 47.51

New trades Long TRE @ 3.42 Short GFI @ 11.06 Long ACE @ 59.16 Short ACGL @ 47.51

Exited trade Sold THG @ 31.94 Covered PTP @ 30.07 New trade Long PUK @ 10.44 Short AXA @ 15.37

Walt, yes financials do backtest really well as you noticed, i think without the crisis and extra volatility they still are a highly profitable group to pair trade, however tail risk is high in this group, i think the high profits is the markets natural premium for the risk assumed, there's...

Yes I read a research paper saying the same, I have yet to test this theory, I think it mostly explains why profit from pair trading exists oppose to a method. Some stocks have less liquidity than their peers, therefore taking longer for industry/market wide news to be priced in. Also some...

1) Left stock / right stock 2) RSI of the ratio 3) Standard deviations from the mean 4) Highest stock price - lowest stock price