Pair Trading Strategy Journal

J

jonnysharp

As some of you may know ive always been a long only, position trader, and have dabbled in short-term trading a few years back. with a bit of extra time on my hands these days i'm gonna branch out again. ive decided to focus on pair trading, i use to know a couple of guys at a firm that were raking in the $$$ trading pairs all day, and this style seems to be more logical and safer than other styles of trading.

i'm going to use this journal as a framework for discipline & consistency in my pair trading. ive done a trading plan and with the help of a program for signals and my own analysis i'm going to post my trades here.
 
I trade a portfolio of pairs as well as some long positions to balance out my capital and stay as neutral as possible. Look forward to seeing your methods. best of luck.
 
thanks for that guys, il try my best.

ok first trade today; i put my trades on in the last hour of the trading day, i find there's good liquidity at that time, prices are not as volatile as the morning and therefore it's easier to get a good fill, also i find prices settle around closing time and if there's still an valid signal at that time its generally more meaningful. I only trade pairs with correlation above 80% and look to exit the trade within several days.

Today;

Short: AEM @ 51.62
Long: GG @ 30.31

I like taking trades where a signal has been produced and the pair has diverged even more, plus the ratio chart looks way overbought as confirmed by a RSI of 98.14. Ive attached a screenshot.
 

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So I guess no one told you there's no significance between a stock priced at $100 divided by a stock priced at $1. It's a waste to just look at the ratio.

The twenty or so steps beyond that chart are what makes the big money, and distinguishes between an amateur and the quant.
 
Quote from bwolinsky:

So I guess no one told you there's no significance between a stock priced at $100 divided by a stock priced at $1. It's a waste to just look at the ratio.

The twenty or so steps beyond that chart are what makes the big money, and distinguishes between an amateur and the quant.
More...

I know its not wise to trade shares that have a significant difference in share prices, so i would never trade a $100 share against a $1 share, also i'm not just looking at the ratio chart when i take trades.

everyones got to start somewhere, i'm trying to start small and build myself up to be a good pair trader, if your a successful quant pair trader please fill us all in on the 20 or so steps you talk of.
 
Quote from jonnysharp:

I know its not wise to trade shares that have a significant difference in share prices, so i would never trade a $100 share against a $1 share, also i'm not just looking at the ratio chart when i take trades.

everyones got to start somewhere, i'm trying to start small and build myself up to be a good pair trader, if your a successful quant pair trader please fill us all in on the 20 or so steps you talk of.
More...

Sorry, it's for sale, though.
 
i try to put on one trade per day, that way i'm consistent. also il try to hold a portfolio of pairs from different industries and never have more than one position in any stock.

today's trade:

Long AMT @ 39.98
Short CCI @ 37.25

Open trades: 2
 

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