Advanced pair trading software

S

Sucat

I do a bit of pair trading and currently my setup sends out orders (bid or ask) when I recognize a setup. I used to try to buy on the bid and sell on the offer and if the market moved I would manually change the order and chase the stock. However, sometimes it cost me more than a few pennies and so I gave up and now buy on the ask and sell on the bid and give up the penny.

Obviously those pennies add up. I didn't know if there was software that would put out a buy order on the bid but if the ask volume gets too low (I trade thick stocks) that it would buy on the ask. Or even better, if the market moved it would pull the orders and reset waiting for another opportunity.

Thanks for any help in this.
 
Who's your broker? I have code that does the same thing for Interactive Brokers (sits on the bid/ask and if one gets hit it triggers the other side) but I know ThinkOrSwim allows to do this natively (at market rather than trying to pick up the pennies)?
 
I am on interactive brokers. My current code sends out the orders but can't adjust based on one order getting filled. They are simple limit orders. And you can imagine getting stubborn missing something by a penny one side and refusing to adjust manually only to lose 10c or much more later on.
 
Sucat said:
I do a bit of pair trading and currently my setup sends out orders (bid or ask) when I recognize a setup. I used to try to buy on the bid and sell on the offer and if the market moved I would manually change the order and chase the stock. However, sometimes it cost me more than a few pennies and so I gave up and now buy on the ask and sell on the bid and give up the penny.

Obviously those pennies add up. I didn't know if there was software that would put out a buy order on the bid but if the ask volume gets too low (I trade thick stocks) that it would buy on the ask. Or even better, if the market moved it would pull the orders and reset waiting for another opportunity.

Thanks for any help in this.
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We offer Realtick which has a server-side pairs trader.
https://www.lightspeed.com/trading-platforms/realtick-pro-and-express/realtick-platform-features/
 

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Is it Realtick Pro with the API and order scripting feature? Does that work with excel? And in general, do you know how difficult is it to learn how to program a simple pair trading program on that? For example, if I wanted to buy 100 shares of DIA and short 100 shares of QQQ for every 1% it diverged, how difficult is something like that setup?

Currently I'm with IB and have excel VBA scripts doing my work. Also, I noticed lightspeed margin is quite high in comparison and I use a lot of margin with my strategies. Its doubtful it would work paying an extra 5% to the broker, do you guys give special rates for active traders or is that stuff set in stone?
 
Sucat said:
Is it Realtick Pro with the API and order scripting feature? Does that work with excel? And in general, do you know how difficult is it to learn how to program a simple pair trading program on that? For example, if I wanted to buy 100 shares of DIA and short 100 shares of QQQ for every 1% it diverged, how difficult is something like that setup?

Currently I'm with IB and have excel VBA scripts doing my work. Also, I noticed lightspeed margin is quite high in comparison and I use a lot of margin with my strategies. Its doubtful it would work paying an extra 5% to the broker, do you guys give special rates for active traders or is that stuff set in stone?
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The Pairs Trader requires the professional version of Realtick ($325/month) but not the API. It is an order ticket. I do not think it is hard to learn how to use. Look at page 2 of the document. No programing is required.

The RealTick for Microsoft Excel add-on I believe requires The pro-version and the API and might cost a total of $425/month. I'm not sure if the Excel add-on is extra. I would not use this for pairs trading, It would be much slower that the server side Strategy Server.

Bob
 
IB has a similar order ticket where I can pair it with something but what I'm trying to do is a bit more advanced. I need it to all be sent out from my excel sheet and the orders have to sit on their respective bid (for a buy) or offer (for a sell). If the market moves a penny away from either of them, the order goes to market. Preferable, it would be able to view the volume so if I'm trying to buy something and the offer volume size got below 10,000 it would go to market. Getting filled is priority #1, waiting for a better price on a bid/offer is secondary.

But I believe this is all moot because as I said I use a lot of margin and a 5% difference in margin would negate the savings of a penny per share.
 
Sucat said:
But I believe this is all moot because as I said I use a lot of margin and a 5% difference in margin would negate the savings of a penny per share.
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You should contact me about debit interest rates. I can tell you from experiance that the cost of getting legged by using the Excel spreadsheet to control your legs will be very costly It is just is too slow.
 
This isn't a direct answer to your question, but I have seen some futures spread traders (who don't use the autospreader) divide each leg into an order to "work" and an order to "lean on." Start with the least liquid leg - you "work" that to ensure you get a decent fill. Once you are filled, you hit the more liquid leg with a market order (which would presumably fill you at a decent price).

This is probably grossly oversimplified (and I probably got the terms wrong) but something to consider.

P.S. I know you trade stocks, but the technique should probably translate from futures with minor modifications.
 
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