Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
Quote from Joab:
Well since you made it personal ...
GO FUCK YOURSELF, DIP SHIT
You trade with Bright ?
That explains everything lol
It still amazes me that Don allows complete MORONS like you to work there.
Are you the fuck up that lost them millions last month.?
Actually the fact that you are probably just a newbie rookie that doesn't have a clue explains everything.
One brilliant comment after another...are deflective comments and random insults what you retort with in your personal and professional life after making false statements?
Well since you made it personal ...
GO FUCK YOURSELF, DIP SHIT
Ummm no, you intiated the personal attacks when you misinterpreted what I typed...what did you say? 'your a liar and your credibility is zero'...
It still amazes me that Don allows complete MORONS like you to work there...
Actually the fact that you are probably just a newbie rookie that doesn't have a clue explains everything.
I trade out of Rob Friesen's office and upon telling Rob that I would be joining his office he said and I quote "that's awesome to have someone of your talent join the office'.
A couple months back Rob had also forwarded my email along with 6 other talented bright traders to a man interested in joining Bright...I was more than happy to answer his questions truthfully and honestly along with about 30 other 'strangers' that have sent me PMS over elitetrader.
Are you the fuck up that lost them millions last month.? There are so many things wrong with this statement I honestly don't know why you typed it...yeah i'm the harvard prof that blew out his account and yet i'm up over 1000% on the year...
In summary Joab, why are you even posting in this thread...? Each comment has been negative, you haven't offered any insight into trading pairs...all you did was criticize the layering approach failing to offer constructive criticism about how you (in detail) profit by trading pairs.
Quote from GGSAE:
One brilliant comment after another...are deflective comments and random insults what you retort with in your personal and professional life after making false statements?
Well since you made it personal ...
GO FUCK YOURSELF, DIP SHIT
Ummm no, you intiated the personal attacks when you misinterpreted what I typed...what did you say? 'your a liar and your credibility is zero'...
It still amazes me that Don allows complete MORONS like you to work there...
Actually the fact that you are probably just a newbie rookie that doesn't have a clue explains everything.
I trade out of Rob Friesen's office and upon telling Rob that I would be joining his office he said and I quote "that's awesome to have someone of your talent join the office'.
A couple months back Rob had also forwarded my email along with 6 other talented bright traders to a man interested in joining Bright...I was more than happy to answer his questions truthfully and honestly along with about 30 other 'strangers' that have sent me PMS over elitetrader.
Are you the fuck up that lost them millions last month.? There are so many things wrong with this statement I honestly don't know why you typed it...yeah i'm the harvard prof that blew out his account and yet i'm up over 1000% on the year...
In summary Joab, why are you even posting in this thread...? Each comment has been negative, you haven't offered any insight into trading pairs...all you did was criticize the layering approach failing to offer constructive criticism about how you (in detail) profit by trading pairs.
If you would have taken the time to read my posts I have shared gems and gold.
Just because you don't like what I've said and it goes against your belief system is what stirred your ass up.
The sign of a good trader is one that has an open mind.
Ok let's get back to business. Here's a thought about correlation. Would like to hear others that have a statistical background.
By definition correlation is a statistical measure of how two securities move in relation to each other and is based on a linear relationship.
The higher the correlation the more likely a 1% move is matched by a 1% move in the other stock within the pair. Correlation is therefore a measure to consider to eliminate risk...
However correlation does not measure the probability of the pair reverting back to the mean. So how does one measure the probability of a pair reverting back the mean?
I also think one could make an argument that correlation does not eliminate volitilty and perhaps a better measure for screening pairs to maintain a market neutral position would be to consider the BETA spread between the pair.
So if we are all chasing alpha returns, why are we even considering correlation in our screening process for pairs?
By definition correlation is a statistical measure of how two securities move in relation to each other and is based on a linear relationship.
The higher the correlation the more likely a 1% move is matched by a 1% move in the other stock within the pair. Correlation is therefore a measure to consider to eliminate risk...
However correlation does not measure the probability of the pair reverting back to the mean. So how does one measure the probability of a pair reverting back the mean?
I also think one could make an argument that correlation does not eliminate volitilty and perhaps a better measure for screening pairs to maintain a market neutral position would be to consider the BETA spread between the pair.
So if we are all chasing alpha returns, why are we even considering correlation in our screening process for pairs?
Yobo,
I also agree that correlation may not be the best way to put together pairs. 2 stocks may have great correlation, but may have a large difference in their prices. So to put that pair on would require a large ratio to get the pair $ neutral. We've all been burned by large ratio spreads. I think a better measure of correlation is the absolute range of Stock A minus Stock B. If the range of a pairs spread is small, it means the 2 stocks never move far from each other. Still I've found that even this doesn't insure mean reversion. It's amazing how 2 stocks can track each other for a long time and then totally go their separate ways. I'm still searching
for a consistent approach.
I also agree that correlation may not be the best way to put together pairs. 2 stocks may have great correlation, but may have a large difference in their prices. So to put that pair on would require a large ratio to get the pair $ neutral. We've all been burned by large ratio spreads. I think a better measure of correlation is the absolute range of Stock A minus Stock B. If the range of a pairs spread is small, it means the 2 stocks never move far from each other. Still I've found that even this doesn't insure mean reversion. It's amazing how 2 stocks can track each other for a long time and then totally go their separate ways. I'm still searching
for a consistent approach.
Interesting topic about correlation, I will try to offer something later regarding that.
Closed 2 trades today at a profit;
Sold PBG @ 31.46
Covered DPS @ 25.55
Sold EMR @ 44.63
Covered ABB @ 22.22
Opened 2 new trades today;
Long MOS @ 87.39
Short POT @ 153.33
Long FCX @ 72.06
Short BHP @ 59.63
Open trades: 12
Wins: 8
Losses: 0
Closed 2 trades today at a profit;
Sold PBG @ 31.46
Covered DPS @ 25.55
Sold EMR @ 44.63
Covered ABB @ 22.22
Opened 2 new trades today;
Long MOS @ 87.39
Short POT @ 153.33
Long FCX @ 72.06
Short BHP @ 59.63
Open trades: 12
Wins: 8
Losses: 0
Yobo,
I look for correlation of a pair as signal to look at the pair a little closer. I use a chart to determine how often the pair reverts to the mean. I subscribe to a database that does the statistical data crunching so I can spend my time trading. From the database I look at the average daily range, correlation, and another ratio developed by one of the database creators that determines how often a pair wiggles back and forth over short and long time frames.
When I see pairs that look promising I pull up a chart on them keeping the ones that seldom trend, while discarding the others. This group becomes my stable of pairs which I constantly look to add new pairs. My favorite charts are red and green daily and weekly bars in a back and forth range right accross my screen. This is not as precise as some real "quant" types might come up with but it works for me.
Bell Weather,
Good stuff. Thanks for sharing the links.
I look for correlation of a pair as signal to look at the pair a little closer. I use a chart to determine how often the pair reverts to the mean. I subscribe to a database that does the statistical data crunching so I can spend my time trading. From the database I look at the average daily range, correlation, and another ratio developed by one of the database creators that determines how often a pair wiggles back and forth over short and long time frames.
When I see pairs that look promising I pull up a chart on them keeping the ones that seldom trend, while discarding the others. This group becomes my stable of pairs which I constantly look to add new pairs. My favorite charts are red and green daily and weekly bars in a back and forth range right accross my screen. This is not as precise as some real "quant" types might come up with but it works for me.
Bell Weather,
Good stuff. Thanks for sharing the links.
i think trading pairs is one of the best where trading with stock is ok ...but much better using E.T.Fs ....indexes.... and using options or futures
ex: SPUD spread
trading pairs it is much safer to average down ...unless you have a crystal ball
ex: SPUD spread
trading pairs it is much safer to average down ...unless you have a crystal ball
Can you mention the name of the database?