Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
IN 0.9649, stop 0.97, target 0.995, OUT 0.99
It was not a good move at first (IN june 1st) and when i had the opportunity to get out at a small loss or flat I decided to ride.
Really my fault.
I set stops based on how much I am willing to loose on a trade, it also determine the trade size. No mechanical rule, purely subjective.
Easy, Stock.
Making spreadsheet entries probably isn't so hard.
However...
This is Jonny's journal of his trades, which he has been generous enough to share with us. He has been faithful to it for many months. Jonny has been doing us a great service, has helped us learn a lot, and has contributed toward many of us making some great money.
He has summarized his trades for us a couple of times.
Thanks, Jonny.
The quantity of the posts is a tribute to the interest that Jonny has sparked. All of us serious about pairs trading have made our investment in searching and reading the many posts. Nothing is achieved in life without work. Do your digging, and you'll get something for it.
That said, it would be nice if life were simpler and Jonny's trades were summarize daily in a spreadsheet. Who shall do that? Perhaps if it isn't so hard to do, you will do it for us Stock?
Walt B
Thanks, and help me with this. The PTF charts work with dollars, and I've been pair trading a dollar neutral strategy for about 4 months now. Not beta neutral. So you've been considering betas. Am I correct that you look for good ratios charts etc. and then also look for similar betas? Or are you trading beta neutral stocks, which PTF does not chart?
My trade days are 4 to 14 days, I expect this trade to be similar, most likely 5 days. I don't know what you mean by "reference index."
Walt B
My search for beta for CVI comes up blank or N/A (yahoo, aol, google, msn) and for DK I get 1.72 at MSN money. Quite a difference from 1.19.
Where is reliable data?
WB
Update: I found beta info at http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=CVI&selected=CVI
Nasdaq CVI 1.62, BK 1.68
Reuters CVI 1.7, BK 1.35
Not much consistency, Yahoo, Nasdaq, Reuters. How is that to be a guide, other than very approximate?
wb
There are different ways to calculate beta.
You can use different time period and index reference.
E.g. from yahoo help page:
The Beta used is Beta of Equity. Beta is the monthly price change of a particular company relative to the monthly price change of the S&P500. The time period for Beta is 3 years (36 months) when available.
Different sites can use different methods.
Regarding the pair-trading method discussed in this thread, i think a shorter time-frame makes more sense.
1 year using daily prices, maybe. But would like to hear what the most experienced traders has to say.
You can use different time period and index reference.
E.g. from yahoo help page:
The Beta used is Beta of Equity. Beta is the monthly price change of a particular company relative to the monthly price change of the S&P500. The time period for Beta is 3 years (36 months) when available.
Different sites can use different methods.
Regarding the pair-trading method discussed in this thread, i think a shorter time-frame makes more sense.
1 year using daily prices, maybe. But would like to hear what the most experienced traders has to say.
I don't see the logic for using beta to balance your pair positions. Beta simply measures the volatility compared to the market, it does not indicate any directional bias. Granted, if your pair trade goes against you it might move kinda fast, but the opposite is also true if it moves in the profitable direction.
If it were me, I might reduce the position size if I thought the movement was going to be too violent.
Don