Pair Trading Strategy Journal

Walt, yes financials do backtest really well as you noticed, i think without the crisis and extra volatility they still are a highly profitable group to pair trade, however tail risk is high in this group, i think the high profits is the markets natural premium for the risk assumed, there's nothing wrong with trading them so long you have a robust risk management strategy in place. If things keep on stabilizing il slowly incorporate financial pairs onto the radar.
 
thanks walt and definately thank you johnny for putting so much work into this. I have learned a tremendous amount and am greatful for all your hard work!

Cheers!

JB
 
what are you guys using for a profit target with pairs?

Im having a hard time on saying, Ive made ____ time to get out?


also Ive noticed the market seems to jump one way or the other the last 30 minutes, is it wise to try to get out of pairs intraday before the market on close madness occurs?

thanks


(success and failure with pair trader here)
 
Jared at PairTrade Finder says IQfeed is more reliable than the free Yahoo. I have a couple of question for those using IQfeed.

1) Does PTF refresh each 5 minutes (or as set in preferences) and does it refresh reliably with IQfeed?

2) Some of my charts skip the last few days (from April 2 jumps to today, April 7), resulting in ratios, mean averages, and +/- deviation charts not accurate. I would guess that this is the software, not the data feed. True?

3) I already get free real time data feed from Ameritrade and IB. I've asked Jared if I could use one of those feeds, instead of paying IQf $60/mon. Anyone have experience with alternate feeds?

4) What's the advantage with IQfeed, as you see it?

I've also asked Jared if they could arrange to have the $50 setup fee IQf charges waived, as some other software providers do.

Walt B
 
Quote from jeffbrewer:

thanks walt and definately thank you johnny for putting so much work into this. I have learned a tremendous amount and am greatful for all your hard work!

Cheers!

JB
More...

Great, Jeff, hope you make some money! Thank Jonny, though. It's his work that we are all gaining from.

Walt B
 
HI Guys,

my normal portfolio management program doesn't really lend itself to pairs trading. No problem entering trades but they are recorded as individual trades so when looking at historical trades it's difficult to figure out the actual pairs.

Before I go putting together a spreadsheet to track the trades, just wondering if anyone would like to share their spreadsheet they use and what sort of metrics they may have setup to measure performance.

TIA

Ivan
 
Quote from spindr0:

It's an old adage but it applies - look to let profits run and to cut losses (don't give up profits either). Look to capture as much of the move as possible not some fixed, arbitrary profit point.

B/A spreads are a fact of life and obviously they're going to affect you. It's part of the cost of doing business. Deal with it :)

Make sure you're using a low fee broker. At 1/2 a ct a share, commissions are a mimimal consideration. You're main focus should be on the strategy. Trade only in size that you're comfortable with.
More...

Thanks for the reply...

I guess what I am asking from those experienced with pairs is:

Let's say you know that a pair of stocks was going to trade at a 1% difference one day(ie, one goes up 11% one up 10%), could you even make money off this trade after the slippage, b/a spreads, and commisions? And even if you don't trade pair intraday, how much have you found these three issues effect your pair trades percentage wise (for commisions you can just state the rate you pay)? Thanks for any help you can provide.
 
Quote from user83248324:

Let's say you know that a pair of stocks was going to trade at a 1% difference one day(ie, one goes up 11% one up 10%), could you even make money off this trade after the slippage, b/a spreads, and commisions? And even if you don't trade pair intraday, how much have you found these three issues effect your pair trades percentage wise (for commisions you can just state the rate you pay)? Thanks for any help you can provide.
More...

I haven't done a lot of intraday testing on pair trading but from my experience the edge is over days and not minutes or hours. Don't take my word for it, do the testing yourself.
 
Quote from user83248324:

Let's say you know that a pair of stocks was going to trade at a 1% difference one day(ie, one goes up 11% one up 10%), could you even make money off this trade after the slippage, b/a spreads, and commisions? And even if you don't trade pair intraday, how much have you found these three issues effect your pair trades percentage wise (for commisions you can just state the rate you pay)?
More...
If you have a reasonable commission schedule and do reasonable size, you can make money.

I pay 1/2 a ct a share. If I do a 2,000 share pair (1,000 long and 1,000 short) and I nab 25 cents, that's a $230 gain after commish. For some, that's a good intraday trade. For others, it's peanuts. What's $230 to you? :)

I look at commissions as the cost of doing business. I have 100's of trades that made/lost very little money. I have others that did quite well. My concern is how much my account apprecaites not how many trades it takes to do that or how much in commissions I pay, percentagewise.
 
You must log in or register to reply here.
Back
Top