Pair Trading Strategy Journal

Closed my best pair trade today! 6.5pts on one side, 1.5pt on the other side made in 5 days;

Sold HUM @ 36.01
Covered XRAY @ 29.24

Got an exit signal aswell for another trade that id been holding for awhile, closed at a loss;

Sold PHM @ 10.66
Covered TOL @ 20.73

Opened 1 new trade today;

Long GDX @ 23.50
Short GG @ 22.90

Im up 31% since starting this journal 10 weeks ago and have outperformed the SP500 by a massive 65% in the same period with less exposure and portfolio volatility. It has so far exceeded my expectations and some.

Thanks for following my journal everyone, posting here helps me to stay disciplined and to not deviate from my trading plan.
 

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Quote from Trend Fader:

Do you trade fulltime?
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not quite, ive found trading fulltime 9-5 can be quite bad for you mentally and physically once the novelty wears off, mostly mentally it really takes a toll on you and it aint good to stare at numbers/screen for too long with 110% concentration the whole time, i use to daytrade a lot and it gave me all sorts of issues even when making money, i know other day traders have experienced the same thing. i now treat trading like being a sumo wrestler, short & quick bouts, get in and get out, the less time I spend in front of the screen the better, currently about 5-6 hours screen time per week and 1 hour per week record keeping, i find this improves my consistency aswell keeping a level head, quality not quantity for me.
 
jonnysharp,

Your latest post with your "most successful pair trade ever" (contrats, by the way) got me curious. In your vast experience, have you ever had a problem taking a trade in a pair that is cross-exchange? (i.e., one stock on the NYSE, the other on NASDAQ) Also, how heavily have you traded pairs with one (or both) being ETF's? (Highly correlated, of course)

Thanks, mousejockey

P.S.: I have been trading off of Pairtrade Finder with my live account for only three weeks, only 100-share lots at a time, no more than one pair on at a time, and still I have already paid for the software three times over!!!!!!!
 
Your journal is my favorite.

1. But I am wondering, considering that your strategy may actually be successful and not just random noise, do you have any second thoughts about posting so much detail about what you're doing?

If too many people start replicating your actions, it will cut and/or eliminate your profits.

2. Perhaps you just work for pairtrader and want to sell the software :)

3. Have you considered the special risk of "security known to be involved in pairtrading"? That is, most pair-traded securities are well-known. And there is serious big money involved in them. Some crisis can happen in such a way that forces these giant funds to liquidate. During such a crisis, you could take a very serious hit, perhaps even blow up. I believe that such an event happened not that long ago (2007?), but I don't have the details off the top of my head.

Daniel
 
Does your program incorporate trade accounting, or do you calculate profit and losses manually? Good job, always interesting to hear other trader's pair trading strategies.
 
Quote from mousejockey:

jonnysharp,

Your latest post with your "most successful pair trade ever" (contrats, by the way) got me curious. In your vast experience, have you ever had a problem taking a trade in a pair that is cross-exchange? (i.e., one stock on the NYSE, the other on NASDAQ) Also, how heavily have you traded pairs with one (or both) being ETF's? (Highly correlated, of course)

Thanks, mousejockey

P.S.: I have been trading off of Pairtrade Finder with my live account for only three weeks, only 100-share lots at a time, no more than one pair on at a time, and still I have already paid for the software three times over!!!!!!!
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No ive never had a problem taking a cross-exchange pair trades. I don't trade ETF's yet, i have thought about incorprating them into my trading plan however, something else to think about i guess.
 
Thanks, yes I have had second thoughts about posting my succesful trading strategy on these forums however there are intricacies to my trading plan that I haven't revealed plus successful trading is 90% disclipine & 10% method so Im not worried about others stealing my edge, plus I take the entry signals with discretion. and no I don't work for pairtrader. yes there is systemic risk involved in statisical arbitrage strategies and we recently experienced that in the first week of october with many large funds liquidating and causing wild divergences, it was actually a great time to put on spreads, my open pair trades went askew however once things ''normlized'' they quickly came back and showed good profits. I think it comes down to one's risk management, one stock completely blowing up shouldn't take you out of the game, succesful trading is all about making heaps of small trades with a slight edge.

Quote from dancalio:

Your journal is my favorite.

1. But I am wondering, considering that your strategy may actually be successful and not just random noise, do you have any second thoughts about posting so much detail about what you're doing?

If too many people start replicating your actions, it will cut and/or eliminate your profits.

2. Perhaps you just work for pairtrader and want to sell the software :)

3. Have you considered the special risk of "security known to be involved in pairtrading"? That is, most pair-traded securities are well-known. And there is serious big money involved in them. Some crisis can happen in such a way that forces these giant funds to liquidate. During such a crisis, you could take a very serious hit, perhaps even blow up. I believe that such an event happened not that long ago (2007?), but I don't have the details off the top of my head.

Daniel
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Quote from GGSAE:

Does your program incorporate trade accounting, or do you calculate profit and losses manually? Good job, always interesting to hear other trader's pair trading strategies.
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thanks, pt finder does have a portfolio management feature, however i think its crap and don't use it, so I just export my brokerage results to excel and cruch my numbers in a spreadsheet.
 
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