Johnny, on the ETP/PAA pair how to you evaluate a short/long that pays a hefty dividend vs the other please?
Thanks
Thanks
Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
Not sure if I understand your question properly, however both pay around a 9% dividend, but its not something I look into too much.
Johnny - excellent thread, great trading. All the best for 2009.
I have questions regarding trade management.
You have mentioned that you do not apply your own stoploss on the spread, just wait for the program's exit signal (which I presume would have a built in stoploss). Also I understand that most trades initially lose, until they turn around to spread convergence.
- What have you seen (typically and worst case) as drawdown for losing and winning trades (in % or standard deviations) ?
- Any "mental" stoploss, or do you solely rely on program exits?
- Are you concerned at all about sudden expansion of spreads?
- Do you feel these trades need a constant "babysitting" for exit alerts? (... I think you mentioned a preference not to trade the whole day).
I have questions regarding trade management.
You have mentioned that you do not apply your own stoploss on the spread, just wait for the program's exit signal (which I presume would have a built in stoploss). Also I understand that most trades initially lose, until they turn around to spread convergence.
- What have you seen (typically and worst case) as drawdown for losing and winning trades (in % or standard deviations) ?
- Any "mental" stoploss, or do you solely rely on program exits?
- Are you concerned at all about sudden expansion of spreads?
- Do you feel these trades need a constant "babysitting" for exit alerts? (... I think you mentioned a preference not to trade the whole day).
Thankyou, yes I stick to the software exit signals strictly which trigger when the pair comes back to the mean, I don't believe there is a stop loss although some trades end in a loss even when coming back to the mean. My win rate is about 72% and avg loss is about 1 and half times the avg win. I don't use any stoploss at all, generally losing trades are one's that take about 20-30 days to trigger an exit, no matter what your style of trading every now and then your going to find yourself in a ugly trade, ive had my fair share, thats part of the game, I just treat it like a business, where you have ongoing costs(losing trades) and every now and then the business requires a capital injection(large losing trade), its a game of numbers, not trade by trade results rather your performance after 20, 50 or 100 trades. I only open the software and my brokerage platform 1 hour per day at market close, less is more when it comes to trading as too much screen time can affect your health, especially mentally it takes a toll. Keep it simple are the truest words ever spoken.
Yes I scan for signals between 3:30-3:40pm, and send MOC orders, sometimes if I don't get MOC orders entered in time il send mkt orders just before the close, yes the closing print will be different from the 3:40 price, usually not by much, sometimes a better price, sometimes not, equals out over time, but I always have both sides executed at exactly the same time which is most important.
Yes I filter through multiple entry signals everyday and am very picky in the one's that I choose, basically I have my pairs watchlist split into different industries, then only look at pairs above 90% correlation, I like to see an correlation in an uptrend, but mostly I'm eyeballing the ratio chart, I want it to be a wide trading range, I don't take entry signals on pairs that have strongly trending ratio charts, I also look at a volatility, spread & fundamentals for anything at extreme readings, but mostly looking at the ratio chart.