Sorry to tell you that but to me they all look crappy. Do you have any reson for your pairs selection? You dont seem to apply what we do here; mean reversion on correlated pairs that move 2-3 stdev away from the mean. I'm also not a big fan of averaging down, but that's personal to you.
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Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
Quote from total_keops:
Sorry to tell you that but to me they all look crappy. Do you have any reson for your pairs selection? You dont seem to apply what we do here; mean reversion on correlated pairs that move 2-3 stdev away from the mean. I'm also not a big fan of averaging down, but that's personal to you.
There is more than one way to make money trading pairs.
KMB/PG in play
Quote from total_keops:
Sorry to tell you that but to me they all look crappy. Do you have any reson for your pairs selection? You dont seem to apply what we do here; mean reversion on correlated pairs that move 2-3 stdev away from the mean. I'm also not a big fan of averaging down, but that's personal to you.
thanks a lot for the somewhat constructive criticism (i am a bit of a coprophile so am delighted with "crappy";-)
i am perhaps from a different school of pairtrading (as Midas seemed to have been so kindly referring to in my defense) and it may be a bit much to ask but would you mind referring me to a post that explains your style of pairtrading in a slightly more detailed way so that i may learn something new to hopefully make a little extra loot?
my reasoning for those pairs is their correlation, both fundamentally and technically, the latter implying that there is a reliable/tradeable mean reversion. as for the 2-3 standard deviation moves out from the mean, take a look at APC - OXY or even the T - VZ for the necessary volatility, if that is what the purpose of the deviation is?
sure, MCD - YUM has been a bit of a trender lately so that may not be great for a 5-7 day swing, which i get the idea is the ideal time frame for you guys?
do you just get in with one layer then have in a mental stop at a particular spread price with a corresponding profit target spread price exit? i was looking at your BDX:BCR pair posted a couple of days ago and assume it may be like that as there has been rather huge spread moves in it moving over 15 points in the past 3 months thus lots of risk, no? volatility in the spreads is necessary for obvious reasons and from what i have read, it seems as if most of you guys have pretty tight risk management so i am sure that aspect is covered?
anyway, any teaching on what you are doing would be most welcomed and if not, just continue the posts and i will try to figure it out by analyzing the pairs you guys put on.
Thanks again and best of luck flaying the market
Quote from Podimer:
thanks a lot for the somewhat constructive criticism (i am a bit of a coprophile so am delighted with "crappy";-)
i am perhaps from a different school of pairtrading (as Midas seemed to have been so kindly referring to in my defense) and it may be a bit much to ask but would you mind referring me to a post that explains your style of pairtrading in a slightly more detailed way so that i may learn something new to hopefully make a little extra loot?
my reasoning for those pairs is their correlation, both fundamentally and technically, the latter implying that there is a reliable/tradeable mean reversion. as for the 2-3 standard deviation moves out from the mean, take a look at APC - OXY or even the T - VZ for the necessary volatility, if that is what the purpose of the deviation is?
sure, MCD - YUM has been a bit of a trender lately so that may not be great for a 5-7 day swing, which i get the idea is the ideal time frame for you guys?
do you just get in with one layer then have in a mental stop at a particular spread price with a corresponding profit target spread price exit? i was looking at your BDX:BCR pair posted a couple of days ago and assume it may be like that as there has been rather huge spread moves in it moving over 15 points in the past 3 months thus lots of risk, no? volatility in the spreads is necessary for obvious reasons and from what i have read, it seems as if most of you guys have pretty tight risk management so i am sure that aspect is covered?
anyway, any teaching on what you are doing would be most welcomed and if not, just continue the posts and i will try to figure it out by analyzing the pairs you guys put on.
Thanks again and best of luck flaying the market
They use pair trade finder (software) and have been doing quite well with it. I check in time to time but have not been involved with the discussion and do not use the software. I trade mean reversion a little more discretionary and less mechanical. It is a good thread. Look in the 1st 10 pages for a discription of what signals they look for.
BTW, I have been putting on a first leg in hcn - hcp around this area (11). The past year has been good for that pair. The only other pair I like, that you listed is 1.3apc - oxy but not at this price.
Good luck.
Quote from Midas:
They use pair trade finder (software) and have been doing quite well with it. I check in time to time but have not been involved with the discussion and do not use the software. I trade mean reversion a little more discretionary and less mechanical. It is a good thread. Look in the 1st 10 pages for a discription of what signals they look for.
BTW, I have been putting on a first leg in hcn - hcp around this area (11). The past year has been good for that pair. The only other pair I like, that you listed is 1.3apc - oxy but not at this price.
Good luck.
thanks so much for the info, will definitely check it out to get a better idea of how they do what they do.
with 1.3APC - OXY's wack volatility, don't want to get too big into it too soon so yeah, will wait a wee bit longer for it to drop before i add my first layer/leg. i guess with you using that terminology, you also "average in" or perhaps, add and remove as the spread moves in and out of its range?
if you might lend a little insight, what do you see as fundamentally "wrong" with CVX - XOM barring last May-June when oil went through the roof and with that, a lot of the oil related pairs' ranges, out the window. before that though, i could not find a more reliably correlated pair with good spread volatility. it seems like it is behaving itself a bit more nowadays as oil is not AS volatile...anyway, whatchoothink?
you ever use VTR with HCN and/or HCP as well? worked pretty well for me last year and seems like it is mellowing from the fall.
best of luck and thanks again
Podimer,
Many people trade cvx - xom but it does not fit my perameters. I have a list (that has grown to around 50 pairs) that I have selected by their tendency to jig (slang for trade in a well defined range and move back and forth in price often).
I usually always layer in with my max size being all layers combined. I determine the max size by the amount the pair moves and use an extreme print in the past as a mental stop. If you layer ALWAYS have an exit plan in place and do not get to big in any one pair. If you use leverage things can and will stay irrational longer than you can stay liquid at some point. Don't be stuborn, expect to take losses. They are part of the game.
Many people trade cvx - xom but it does not fit my perameters. I have a list (that has grown to around 50 pairs) that I have selected by their tendency to jig (slang for trade in a well defined range and move back and forth in price often).
I usually always layer in with my max size being all layers combined. I determine the max size by the amount the pair moves and use an extreme print in the past as a mental stop. If you layer ALWAYS have an exit plan in place and do not get to big in any one pair. If you use leverage things can and will stay irrational longer than you can stay liquid at some point. Don't be stuborn, expect to take losses. They are part of the game.
2 new trades;
Long NU:UGI @ 0.8533
Short AMP:EV @ 1.0967
And another one "outside the box", Short MFC: NPBC. Much more risky and not a correl play.
Podimer, I will try to explain my parameters tonight. Time to go jogging.
Long NU:UGI @ 0.8533
Short AMP:EV @ 1.0967
And another one "outside the box", Short MFC: NPBC. Much more risky and not a correl play.
Podimer, I will try to explain my parameters tonight. Time to go jogging.
Quote from total_keops:
2 new trades;
Long NU:UGI @ 0.8533
Short AMP:EV @ 1.0967
And another one "outside the box", Short MFC: NPBC. Much more risky and not a correl play.
Podimer, I will try to explain my parameters tonight. Time to go jogging.
Total, how are you doing?
Can you share your statistics?
I am asking, because I am following a different aproach.
These 2 pairs are techically very strong, but EV presented results today :
" Analysts say flows weaker than expected (Updates with analyst, executive comments; comparatives with Legg Mason)
"
I usually avoid these situations, are you doing good, trading pairs, where one of the stocks presented results?