is anyone successful in pair trading?

Hi. I have been watching the index spreads for months. Here's a couple things:

IWM is the hedge leg for the Dow. This is because the Dow needs a hedge that has broad sector make up. This trade is a favorite among prop firms for equity spread trading. This is the original 'cap spread.' Huge money in this one. Check it out. Seems like you just had bad timing. The spread is long YM short RTY with a 2:3 ratio. A months long trend was unwinding which made your pair trade suffer. The Russell 2000 had a massive bid that lasted for about a week while this thing unwound.

DOW-RUT.png
 
trend2009 said:
I tested pair trading a few days ago, shorted 200 shares of iwm and long 100 shares of SPY, lost 800 dollars in 4 or 5 days. huge opportunity in pair trading arena. 1000 stocks have 500,000 pairs, all moving up and down. any one successful in pair trading?
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I tried for over a year. Pairs were selected with correlation and co-integration and back tested. Have to watch for any upcoming earnings or other factors behind stock to avoid surprises which interrupt correlation. Stop tolerance had to be wide. I lost money and moved on to other methods. Not that it doesn't work but I couldn't get it to work for me.
 
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