Pair Trading Strategy Journal

[coreed]

New Trade:

Bought WX @ 15.26
Sold @ BMY @ 24.94

Signal taken at Layer 2(2.5 SDs)

What I like about trade:

Good oscillation around mean on ratio chart.
High corr.
% - > Mean is at historical extremes (4.83%)
At Layer 2


What I don't:
Spread is not at 50d extreme.
Recent action on corr. chart is pointing down.

Of all the indicators I look at I give the least weight to the spread chart.

My primary indicators are:
Ratio chart
% - > Mean

Curious to know how other traders filter.

 

[total_keops]

Watch list, all ETFs:
UNG / (0.3265*RZV)
EWS / (0.2349*EWW)
XLP / (0.2515*TIP)
Did not yet made any fundamental analysis or dividend watch.

 

[coreed]

Sold GFI @ 11.92 (6.91%)
Covered GG @ 38.74 (-12.52%)

Sold FITB @ 12.59 (9.29%)
Covered WBS @ 16.47 (-6.88%)

5 trades posted on this forum:

3 wins
2 losses

 

[total_keops]

Quote from total_keops:

Watch list, all ETFs:
UNG / (0.3265*RZV)
EWS / (0.2349*EWW)
XLP / (0.2515*TIP)
Did not yet made any fundamental analysis or dividend watch.

Got in the 3 pairs.
Long: UNG/RZV 8.91/33.39
Long: EWS/EWW 10.91/49.06
Short: XLP/TIP 27.08/103.74

 

[coreed]

Quote from total_keops:

Got in the 3 pairs.
Long: UNG/RZV 8.91/33.39
Long: EWS/EWW 10.91/49.06
Short: XLP/TIP 27.08/103.74

Totalkeops - Do you only pair trade ETFs?

 

[total_keops]

Quote from coreed:

Totalkeops - Do you only pair trade ETFs?

Yes

 

[saico]

Since I was not happy with the results lately, I made some tweaks to my pair trading. Here is the first trade.

Long PVA @25.90
Short SFY @28.79

 

[coreed]

New Trade: NYSE Pipelines:

Bought WMB @ 21.10
Sold MMP @ 43.76

What I like about trade:

Non-trending ratio chart
% -> Mean at near term historic levels
Corr. chart flat at high reading(90%)
50d Spread at extreme

What I don't like:

Nothing. The perfect set up according to my trade parameters.

There is still no guarantee that this trade will be profitable.
No matter how strictly I filter, av win rate fluctuates around 70%
Anybody getting > 70% ?

 

[BD1]

Quote from coreed:

New Trade: NYSE Pipelines:


No matter how strictly I filter, av win rate fluctuates around 70%
Anybody getting > 70% ?

144 trades since 8/2009.
Win rate 72.2%
Ave win 1.45%
Ave loss 2.18%

There is some learning curve in these numbers and lately ave win/loss have been the same. I had a couple of larger losses that I let run too long. Now I am better about cutting losses. Have also gotten a bit better at exiting trades. In the early trades I gave up a bit of profit being impatient on trade exits. All this comes with hands-on experience.

Overall I am pleased with my trading results and the pairs strategy. I expect I can do better on ave win/loss % but I think overall winning trades will be around 70%. That is what many others do and what many of the studies show.

To use an american sports analogy, this strategy is about hitting singles not grand slams.

 

[total_keops]

OUT of EWS:EWW at half profit target. +1.71%