Pair Trading Strategy Journal
- Thread starter jonnysharp
- Start date
PTF makes it's alerts based on standard deviation of the current ratio of prices of the pair from the mean ratio. It is user configurable, but most have it set for the first alarm at 2 SD's.
But that does not mean the pair will be profitable. You must still evaluate the pair to decide if the pair will actually revert back to the mean. (This is dollar neutral, mean reversion pair trading.) MANY pairs that have deviated 2 SD's won't revert, and are losers. Learning to cull those and stay with the profitable ones were the key to my early success. I spent a month analyzing every one of Jonny's trades beginnng in Sept 2008, I believe, through January 2009 to determine the primary factor in his winners and his losers.
The biggest factor is to analyze the Ratio Graph and avoid betting on pairs that have diverted on the wrong side of the trend -- ie: with the trend is bad; against the trend and you have the chance that the ratio will revert before the mean changes to meet the ratio. You want the ratio to change direction to move back to the mean average, not continue on to follow the trend.
I also watch RSI of the pair closely. When RSI has reached 30 or 70, there is a far better likelihood that the ratio is prepared to revert. I usually wait until there are signs that the reversion has begun.
WB
New Trade: NYSE Financial Admin.
Sold HPY @ 17.39
Bought DLX @ 19.42
What I like about trade:
Perfect non-trending ratio with good oscillation around Mean.
% -> Mean at near term historic levels
Corr chart reading high and trending upwards slightly.
What I don't:
Spread chart in in middle of 150d range.
As banal as it is to repeat almost the same things with each trade, objective is to show that consistent application of a simple methodology can and will provide an edge if applied over a large enough sample of trades.
Sold HPY @ 17.39
Bought DLX @ 19.42
What I like about trade:
Perfect non-trending ratio with good oscillation around Mean.
% -> Mean at near term historic levels
Corr chart reading high and trending upwards slightly.
What I don't:
Spread chart in in middle of 150d range.
As banal as it is to repeat almost the same things with each trade, objective is to show that consistent application of a simple methodology can and will provide an edge if applied over a large enough sample of trades.
Hey there Raj the omniscient, try whichever one works best for you
http://clearstation.etrade.com/cgi-bin/Itechnicals
or as you requested
http://biz.yahoo.com/p/s_conameu.html
which I arrived at by pulling a stock,
CVX>>profile(left column, halfway down)>>BASIC MATERIALS(under "details")>>"sectors" (upper left)
If it is a list of S&P 500 stocks broken into sector details, that would be convenient but I have no clue as to where it may be found.
Hope this helps
I saw your post "
I'm about to install PTF on my notebook. Unfortunately I got some issues creating a database caused by a SQL DB error. The error message is like ''Unable to open ''pairTradeFinder'' data base. Logon error...''
Did you solve it yet ?
This was my first time to install tis program, however, when I clicked the "Set " button on the Database setup page , the same error msg ''Unable to open ''pairTradeFinder'' data base. Logon error...'' occured. Is there anyone who knows how to fix it ?
If I created a new blank db named "pairTradeFinder" manually, then the error msg disappeared. Unfortunately , when I clicked "OK" button below next , it showed another error msg as attachment . Plz help me ~ Thanks in advance.
alex
I'm about to install PTF on my notebook. Unfortunately I got some issues creating a database caused by a SQL DB error. The error message is like ''Unable to open ''pairTradeFinder'' data base. Logon error...''
Did you solve it yet ?
This was my first time to install tis program, however, when I clicked the "Set " button on the Database setup page , the same error msg ''Unable to open ''pairTradeFinder'' data base. Logon error...'' occured. Is there anyone who knows how to fix it ?
If I created a new blank db named "pairTradeFinder" manually, then the error msg disappeared. Unfortunately , when I clicked "OK" button below next , it showed another error msg as attachment . Plz help me ~ Thanks in advance.
alex
Quote from Myshkin:
Hey there Raj the omniscient, try whichever one works best for you
http://clearstation.etrade.com/cgi-bin/Itechnicals
or as you requested
http://biz.yahoo.com/p/s_conameu.html
which I arrived at by pulling a stock,
CVX>>profile(left column, halfway down)>>BASIC MATERIALS(under "details")>>"sectors" (upper left)
If it is a list of S&P 500 stocks broken into sector details, that would be convenient but I have no clue as to where it may be found.
Hope this helps
I think this will help bacause if I put all 500 list in one category in pairfinder it crashes as to find a pair and compare it with other 499 is a pretty long job.
There are 124750 pairs possible among 500 stocks. You may need a stronger software to make the calculations ;-)
I wrote my own program in C++ so I can go through all possibilities smoothly
