Charts of Note

Although I have PM omitted from trading due to earnings, I took a look at this running away PM RAI. It would have triggered an entry yesterday, 7-18, around 10 EST at 2.30 standard deviations had it not been omitted.

The convergence in that pair should be very soon for everyone getting squeezed in it on here.

good luck,


PG
 
Quote from IrisPairsGuy:

Although I have PM omitted from trading due to earnings, I took a look at this running away PM RAI. It would have triggered an entry yesterday, 7-18, around 10 EST at 2.30 standard deviations had it not been omitted.

The convergence in that pair should be very soon for everyone getting squeezed in it on here.

good luck,


PG
More...

That would have been an incredible call had you seen that then. It would have been quickly followed with a major 3 day reversal (incredibly quick and rapidly favorable for the position).

I just posted my insights into this pair position where I usually post narratives on my pairs at the JOURNAL forum, on the thread Pair Trading Strategy Journal. I explain there how RAI the Short has been very overbought and profit taking would be occurring even into the earnings report tomorrow (as long as earnings were not too favorable). I don't usually get into the weeds too much about these things, being more simple minded just looking at chart plots. But sometimes the obvious just screams at me and it is helpful to taking it into consideration.

http://www.elitetrader.com/vb/showthread.php?s=&postid=3846868#post3846868
 
PM RAI gave another opportunity on Friday, July 19, to enter at the same level. I put on 1 level in a small side account just to see it play out and follow along with this thread. If I traded this normally (meaning w/o any news/earnings omission) I would have entered it on the 18th...and added several more levels on the 19th.

The attached chart shows my level 1 entry on the 19th along the standard deviation line, and the other orange line represents the % divergence/convergence of the pair, always starting at zero from the bottom left start date (scale is on the left of the chart). My trade stats for the pair are included on the bottom...

Nice to see it come in for you a bit.

PG
 

Attachments

PM RAI is now queued up for auto exit. As I mentioned before, this was more of a 'play along trade' but the one small level I put on ended up returning a healthy ~3.50% in 8 days.

Chart with entry/exit and trade stat info is attached.

PG
 

Attachments

Chart 5

RAI Short
PM Long

Past break even today (still in session) and moved well into the money.

Chart posted while trading in session today.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3851371>
 

Attachments

Quote from deucy28:

Chart 5

RAI Short
PM Long

Past break even today (still in session) and moved well into the money.

Chart posted while trading in session today.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3851371>
More...

I closed a bit early and took a small loss. I had that pair opened for almost a month.
 
Quote from koolaid:

I closed a bit early and took a small loss. I had that pair opened for almost a month.
More...

koolaid, it is unusual but not extraordinary to go into a 3rd month of open trade as this trade did. But thankfully it allowed us to add layers. Just understand that by doing so with the associated, additional layers added on AND most importantly looking back at the longer term charts....2 months, 6 months, 1 year....there was plenty of evidence that this pair has experienced spreads as large as what we were experiencing. This obviously illustrates the pair will return to the mean if not totally, then at the least, very much so to allow us gains.

PLEASE LOOK AT MY POST THAT SUPPORTS THIS ON July 17..chart 4.
http://www.elitetrader.com/vb/showthread.php?s=&postid=3843714#post3843714

In fact on chart 4, I accidentally left out an additional, very recent date that also indicated the large spread that occurred after we got into this trade is not unusual. All of those earlier large spreads returned to a more normal spread that would allow us to make money again.

Finally, if you have not traded my style, or even if you have for a few years, it is easy to bail out prematurely. There is no shame. We all can take only so much "pain." But with experience, you begin to understand the pain is opportunity to take advantage of with My Style of pair trading. I won't say a black swan cannot exist, but I take great pains in picking a pair to allow that probability to be one that defies all odds.

You might wish to read this post today I made on a new thread that someone started on mean reversion.

http://www.elitetrader.com/vb/showthread.php?s=&postid=3851399#post3851399
 
When to exit a pair trade ?


Although this is personally subjective to the trader / investor, here is one approach to exiting that is the most common to the small group I trade with.

This is merely a primer on a basic. Good for newer or wanna-be pair traders who can take this core concept and modify it to taste. A real life, real trade in progress is being used here. Again, this is basic. There are other relevant methods to plan an exit for the specific trade or investment being put on based on one's general style (my group has one style only) and length of time intended for the position being put on. The explanation / illustration is core to our style of pair trading....swing trading and numerous small capital, high-yield intended investment positions. For the shorter term, momentum pair trader, this may be of limited use.

However, a planned post on my group's technique for scalping pairs with proven tendency to have predictable, rhythmic rolling intra-day or over a few days may interest the typical momentum pair trader or those wishing to explore scalping. With some pairs, it occurs so frequently that scalping becomes integral to the over all trade of a pair for many reasons: why leave money on the table; modest embellishment of the final result at pair's last close; mitigation (some call it insurance) of a failed objective for the intended trade.

There is an "aside" or post script added to it that is interesting, I think, that explains how mufti-dimensional pair trading can be. It's not the Army, but it is an adventure.


http://www.elitetrader.com/vb/showthread.php?s=&postid=3855753#post3855753

I like to keep narratives and exchanges on that thread...Pair Trading Strategy Journal.
 
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