You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
I was asked--considering my enthusiasm for this trade starting Aug 1-- by what manner does the HOT HST pair trade exceed anything more than a "normal" one because it appeared to him to be just a normal spread.
The response I made on the chart itself included three points, and I think is luminative:
http://www.elitetrader.com/vb/showthread.php?s=&postid=3626832#post3626832
1. The probability of this trade, started Aug 1, was so very high that it would be a gainer that I tripled my normal shares for an initial opening trade. The probability was based on its unusual series of CHART HISTORY, top down. I start with very long term charts and examine from there sequentially shorter term charts. This was one of the best, if not the best I have seen in 4 years. Understand, I have done little trading the last 2 years.
2. The maximum potential of gain was higher than normal;
3. The time I estimated that the previous two described advantages would materialize would be quicker than normal.
The intra-day spread today went favorably very nicely, and I believe there is a 60% chance of 40% more gain. I have closed out this trade, because I do not enter new trades with 60% odds in my favor for a gain. I attempt to find potential trades that suggest 100% probability for gain. It happens, however, that some 100%-ers are much better than others. When trading in my 100 per cent probability world, there IS diversity.
Unfortunately this deserves more time in research to find trades that with my current projects in life, I don't have the time to prospect now. Anyone wishing to nominate trades, please post and we can examine them. A trade for me is examined Top Down. I look at long term charts and work my way down to days. It has to make sense all the way across its history.
The response I made on the chart itself included three points, and I think is luminative:
http://www.elitetrader.com/vb/showthread.php?s=&postid=3626832#post3626832
1. The probability of this trade, started Aug 1, was so very high that it would be a gainer that I tripled my normal shares for an initial opening trade. The probability was based on its unusual series of CHART HISTORY, top down. I start with very long term charts and examine from there sequentially shorter term charts. This was one of the best, if not the best I have seen in 4 years. Understand, I have done little trading the last 2 years.
2. The maximum potential of gain was higher than normal;
3. The time I estimated that the previous two described advantages would materialize would be quicker than normal.
The intra-day spread today went favorably very nicely, and I believe there is a 60% chance of 40% more gain. I have closed out this trade, because I do not enter new trades with 60% odds in my favor for a gain. I attempt to find potential trades that suggest 100% probability for gain. It happens, however, that some 100%-ers are much better than others. When trading in my 100 per cent probability world, there IS diversity.
Unfortunately this deserves more time in research to find trades that with my current projects in life, I don't have the time to prospect now. Anyone wishing to nominate trades, please post and we can examine them. A trade for me is examined Top Down. I look at long term charts and work my way down to days. It has to make sense all the way across its history.
Quote from deucy28:
short CI
long AET
The chart in which I was considering the trade is at the forum TRADING and at the thread Charts of Note. Posted Sept 9th.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3631301>
Attachments
Just for fun..........
Look at stock plots two weeks after position opened and subsequently closed. The train kept going. The purpose of this chart is merely to affirm the original consideration for the trade had merit.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3635098>
Look at stock plots two weeks after position opened and subsequently closed. The train kept going. The purpose of this chart is merely to affirm the original consideration for the trade had merit.
<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=3635098>
Attachments
Quote from koolaid:
What programs are u using to scan for pairs?
LOL ! !
Programs ? PROGRAMS ?
I don't need no stinkin' programs.
Readers of this thread (from when I first posted in August) know I don't use any.
(I am a closet wisher of a program that finds what I am looking for, though.)
Now it's just lots of barbaric hours on charts searching for prospects. Many of my trades are the same pair I have traded in the last 4 years. I keep them on a watch list, with the original starting point of their respective, earlier trade where I can monitor by a simple meter how their spreads are doing. I pick a lot of trades that way.
I am also dreaming for the day when my web site goes up. Just like pairs trading (MY way), it will be very simplistic. I will teach (fast learning curve) what I am looking for. Priority is on SAFETY of the trade as a huge filter. Never know when baby needs a new pair of shoes.....hehe. They grow sooo fast. MY way is not sexy, but consistently very high ratio of successful trades to overall trades. Not to get too carried away, mostly they are safe on base by singles and plenty of doubles, but not without the occasional triple and home run. My earlier post, Short HOT and Long HST was somewhere between a triple and a homer. Best chart I've seen in 4 years, I loved the results, but was hoping it to be a grand slammer.
I will be posting at that web site nominations for trades all the time and WHY they are selected. It will be quick learnin'. Then all you brainiacs can nominate to me pairs and what will be a tiny staff to assist me in filtering them. There will be a nice incentive for contributors of consistent, quality nominations. But that will be explained then; it will be a big driver to assist in group winning but even nicer reward for the individual. If group winning is good enough for you, you are welcome with no contributions; you are welcome to pick from many of the nominations that pass my filter. For the consistent, quality contributor, there will be a bigger carrot he/she can enjoy.
I live in Bill Gates land. Lots of talent here. I DO wish to find someone who can build the scanner software for what I am looking for. I have had a good conversation with a group in Minneapolis. We'll see. Do you know the NUMBERS of combinations and permutations for even correlated pairs ? ... hehe........right now its just time and sweating over charts manually.