Pair Trading Strategy Journal

thanks for the heads up about the beta testing of the new version. that's a drastic improvement, gives me way more confidence being able to see equity curve and winning % and biggest loss

I really appreciate what you are doing here, that heads up has literally saved me several grand in the past week by updating/changing out to better pairs
 
Quote from tradingtrading:

Have you ever looked at using Kelly Optimal fractions in order to control money management? I'm new to this and am trying to build up some data with which to estimate these fractions.

I guess that trading when it comes back to the mean, means that the average Win and Average Loss will be assymetrical. Have you thought of setting targets with a fixed stop loss/take gain (say 2% ex comms) and that way, if you have a winning record it wont be hard to work out how to manage the risk of ruin, but still optimise return?
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Just keeping it simple with the money management, nothing fancy. The average win and avg loss aren't asymmetrical, as its a rolling mean, not a static one, I don't think using profit or loss targets in any system improve performance, its better to let the market decide how much you make, some days less, some days more, just always have the flexibility to take whats on offer.
 
appleseed, yes MOC orders most of the time or try and enter right before the close, I find trading around the close to be the best time, more liquidity, tighter spreads, reduced volatility. I know yahoo use CSI as their data supplier, and I would say they receive the NYSE closing price aswell, the whole idea of the opening cross and closing cross is to create a definite price for open and close that can be used and accounted for, so everyone see's the same price otherwise everyone would have a different price at 4pm.
 
No probs zeke.

Fridays Trading:

Closed trades:

Sold AEC @ 5.53
Covered HME @ 35.32

Sold TMK @ 29.26
Covered MET @ 27.58

New trades:

Long MA @ 172.84
Short V @ 65.01

Long DAC @ 4.07
Short SB @ 4.89

Sitting on a 110.4% return for the journal, portfolio at all time high.
 

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The last couple of days havent been too good for my growing portfolio. I have closed 4 trades in all (3 winners) for a profit of £255.96 (£1/pt spread betting). I have 13 open positions, 7 of which are losing. My open position are down £39.15. I'm now starting to be a little more selective in the positions I open. I've also moved my new trades to Tradefair from my usual account at CMC only because I have a good relationship with Betfair and the TF spreads are sometimes a little tighter than those of CMC.
My coder and I are also developing a new user interface for the CFD exchange Tradefair will be opening later this year. We intend to make this available to Betfair users too. It will have very similar functionality to Button Trader which is a great piece of kit.
 
my biggest problem with pair trading is the the day to day gaps in my in PnL

I have lets say 20 pairs out, all about the same dollar value, boom the market opens and Im up $2000 or down $2000 within 10 minutes from the steep gaps overnight.


it kills my ability to trade the rest of the day if Im down so much from pairs so early.


also it seems pairs are more of a semi-investment then a trade as Ive held some pairs for over 4 weeks.


Ive heard of a few guys who trade pairs and close everything at the end of the day, he trades oil pairs all the time, and done by the end of the night. but overcoming comissions would be hard, but I like the fact I dont need to worry about the steep gaps.

last week I had a few oil stocks for pairs, the overnight gaps killed me! ugh


plus when you backtest pairs, it does work but the long periods of being down dont mix well with my personality.
 
My biggest problem with the pair trading is to decide when to close the position and what to do when the pair goes against me.
 
Quote from gkishot:

My biggest problem with the pair trading is to decide when to close the position and what to do when the pair goes against me.
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when to close? some like 70% ATR,?

I like to close out before the post at 3:40 and I like to put on pairs when the marker is quiet (noon)


goes against you? hell put on another layer, the pair is on discount :)


Im glad I didnt put on a second layer of long KSS short JCP. Im down 4k on that pair within 2 weeks
 
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