I just tested the pair trade manually.
is anyone successful in pair trading?
- Thread starter trend2009
- Start date
I just tested the pair trade manually.
I did not give much thought when I placed the trade after I saw iwm moved higher than spy.
Been considering pair trading off and on. I need to pay more attention to the macro environment and ask myself the questions of who benefits more in a particular situation and how long might that situation last. Perhaps the beginning of next year I will look at buying QQQ and selling SPY because of the historical tendency of QQQ to outperform that time of year. Perhaps I’ll add a condition of vix remaining below a certain level as QQQ tends to be more volatile than SPY and don’t want to get beat up on a major market decline. In the alternative, I could adjust my trade size to account for the relative volatility difference between the ETFs.
you mean you traded intraday pairs? what is the outcome? anyone uses candlestick to identify patterns in pair?
Intraday or swing depending on outlook. An example for a intraday trade might be a bullish crude inventory report for XOP, while at the same time tending to be bearish for IYT or XLU. Although I don’t directly use candlesticks for intraday charts, I am well aware of where price is relative to the RTH open.
I often put on a few pairs trades each year. I think it could be a very good strategy for others provided it is combined with strong risk/trade mgmt.
Whats nice is your can set up an alert & get an email or SMS text when you get stopped out. You would not have to be glued to the market. The other benefit is that the winners typically turn a profit most days no matter which direction the broad indexes are moving.
Here is an example: Gold (GDX) was showing strong relative strength & retail (XRT) had weak RS. This pairs trade had a reward-to-risk over 10:1.
Whats nice is your can set up an alert & get an email or SMS text when you get stopped out. You would not have to be glued to the market. The other benefit is that the winners typically turn a profit most days no matter which direction the broad indexes are moving.
Here is an example: Gold (GDX) was showing strong relative strength & retail (XRT) had weak RS. This pairs trade had a reward-to-risk over 10:1.
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So what that means is as the correlation declines they make money as the spread between the pair gets wider.
Interesting pair of gold miners to retail. I typically would not have put this trade on because of the heterogeneous nature of the two industries. But maybe on the short term time frame, they are similar enough (both 'risk on' assets) and end up being a hedged divergence bet rather than a pair trade - I will have to look into that. I do pair trading but I tend to do correlated/cointegrated stocks (eg. TGT/WMT), stock/ETF combos in the same industry (eg. XLE/XOM) or producer ETF vs commodity (eg. GDX/GLD or USO/XLE).