Pair Trading Platform

Quote from ronblack:

Pair trading is for those who love double losses.
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either you haven't done it or more likely, you are doing it INCORRECTLY:D
no holy gr-r-r-r-ail, but a technique with concepts that are simple to understand (unless you start jabbering in statisticsese), requires little to no honing of instincts, lets you sleep at night when holding overnights and can actually make you a little money every month, providing of course, that you employ basic risk management practices.
 
I have modified the Excel spreadsheet IB provides with their API download to allow futures pair trading (ES/NQ, EMD/TF). It gets quotes(bid, ask, last, size etc.) using DDE - and once the quotes for the legs are in, it's very easy to calculate your spread values. It works reasonably well for me. But what I do not like about it is that when conditions are met, it sends both legs as a market order. It should be possible to write code to work the legs separately and (possibly) get a tick better execution, but I never bothered. Other than that, it works reasonably well. I set it for a target price and if the spread price is met, it sends order automatically to TWS using DDE.

I don't do stocks, but see absolutely no reason why a similar arrangement would not work for stock, option, futures option, whatever.
 
If you would like to trade pairs without any programming or scripting have a look at Cyborg Trading's Smart Spreader. You can load in up to 4 symbols and Cyborg will create a custom spread market with a clickable interface. buy or sell, place limit orders at specific prices, and cancel orders with a single click. Cyborg will place your spread orders on your Sterling Trader Pro Front-end platform and constantly "work" them to maintain your desired spread price. Also you can select with legs you would like to be worked and how you would like the other legs to hedge once you have a fill.
for more info check out: http://www.cyborgtrading.com/css-site/spreadtrading/index.html
 
If anyone is interested in seeing some of our daily pair picks (some of our pair trades which are listed on the blog each day) some free pair trading tools (such as Henry Carsten's Pair Trading Tool) or just additional information on Pair Trading please visit our blog at:

http://blog.bampairtrading.com

We also have our strategy available for Tradestation or MultiCharts traders. If interested please visit our store at:

www.bampairtrading.com

Enjoy!
 
Sorry, I've been absent from this venue for a while. We do this for equities. Up to 5 levels of priority to order your executions. Waves to limit legging exposure. In addition you can have several components in your portfolio, this helps folks create products with less volatility vs. standard pairs.

Example:

MCD,EAT,YUM could have weights 1, -1.2, -1.3

If interested in a demo drop me an email.

...thanks..greg
 
I attached a screenshot of a software package that I have been building for pairs trading. It allows you to analyze a wide variety of things such as correlation, cointegration, price ranges, etc. Check out the attached picture and if you're interested shoot me a note and I will set you up as a beta tester.
 

Attachments

While IB TWS does not offer pair analytics for finding pairs, TWS does provide several tools for executing pairs.

1) The simplest tool is the Merger Arbitrage window. You can use it to create a combination order for an anticipated merger between two companies or any stock pair and execute it as non-guaranteed combo.

You can execute at your desired price or trigger execution at your desired price but then chase the market to get the trade done using the MIT ("Market-If-Touched") order type.

When you create the combo, a pop-up window will offer the option to try to split the spread and provide liquidity on one side of the order ("attempt to add liquidity"). This increases the probability of a one-sided execution, but also increases the probability of execution overall as the system can start working the order faster, and when successful, decreases the (unbundled) execution cost for stocks because then you are getting a maker fee from the exchange on one side.
A large order will automatically be done in chunks, this is done by the server.


2) You can combine the combo with the Accumulate/Distribute algo to build a large position on one side.
Only MIT and not LMT order types makes sense with this algo.


3) You can alternatively combine this with the Scale Trader. The Scale trader offers two more options:

a) You can increase the price over time to make the order more aggressive, if you want to build a position regardless.

b) Scale Trader offers a profit-taker which would trade out of the pair at a favorable price.

Both #2 and #3 have the option of only taking liquidity or attempting to provide liquidity on one side.
 
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