Pair Trading Strategy Journal

Quote from coreed:

BD1 don't complicate your life by second guessing your system. Often doing nothing is the hardest thing to do.But you have to learn how to do it. Let your profits run.

Tomorrow might be the day that GS upgrades/downgrades one side of the pair. On the other hand the spread might widen, and you will feel justified in second guessing your system today. Unfortunately, all you have done is reinforced a bad habit, which will not serve you in the long run. Systems are not supposed to be second guessed.

Not trying to lecture BD1, I am happy you are seeing a profit, just want you to feel good for the right reason :)
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coreed I am not sure if you are understanding what I am doing. I am sticking to the system and trying to make this as mechanical as possible and maximizing the profit potential of each pair. This is just a nuance of the P&L math of the ratio over time. If you look at the slope of the MA line in the chart I attached I exited this trade when the ratio was at 1.18 which is lower than the MA is at anytime tomorrow. So I locked in a profit higher than the MA line for tomorrow. I only do this when the MA line is sloping up/down like this. When the line is sloping the P&L at the MA line is changing everyday.

I have always thought a nice upgrade to PTF would show the P&L in the future along the MA line. I just calc it manually like I said looking ahead one day. If I can lock in a higher profit today than is actually possible tomorrow just following the MA line then I do it. It's a very mechanical process.

Yes GS could upgrade the long (but they could also upgrade the short). This system is about mean reversion with no news hitting the pairs which of course you know. Waiting for an upgrade/downgrade is not part of the system. (Actually with the upward trend of the market over the past year with more upgrades vs downgrades, many of my losing trades have occurred with shorts getting upgraded in the middle of a trade. Upgrades to the longs have not offset this during this trend, at least for me).

When I exit like this I track the P&L difference when PTF gives the exit signal and for the past 8 months this has increased my P&L on well over 80% of the trades. Mechanically it has to increase the P&L except for gaps well beyond the MA line.
 
Quote from Davidg29:

You don't need to use the filters, you can just take the trades as given by the software and you will still be profitable.
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Thanks Davidg29. Much appreciated. I am going to do what you have suggested. I have got too many shares uploaded-s&p 500, Nasdaq 100, FTSE100 . I get too many buy/sell signals and even it is so difficult to spot the exit signal when it comes. Is there an easy way to find exit signal for the trade you have done.

Can you suggest what shares I should enter and clear the vast population I have created. Thanks again.
 
Quote from BD1:

coreed I am not sure if you are understanding what I am doing. I am sticking to the system and trying to make this as mechanical as possible and maximizing the profit potential of each pair. This is just a nuance of the P&L math of the ratio over time. If you look at the slope of the MA line in the chart I attached I exited this trade when the ratio was at 1.18 which is lower than the MA is at anytime tomorrow. So I locked in a profit higher than the MA line for tomorrow. I only do this when the MA line is sloping up/down like this. When the line is sloping the P&L at the MA line is changing everyday.

I have always thought a nice upgrade to PTF would show the P&L in the future along the MA line. I just calc it manually like I said looking ahead one day. If I can lock in a higher profit today than is actually possible tomorrow just following the MA line then I do it. It's a very mechanical process.

Yes GS could upgrade the long (but they could also upgrade the short). This system is about mean reversion with no news hitting the pairs which of course you know. Waiting for an upgrade/downgrade is not part of the system. (Actually with the upward trend of the market over the past year with more upgrades vs downgrades, many of my losing trades have occurred with shorts getting upgraded in the middle of a trade. Upgrades to the longs have not offset this during this trend, at least for me).

When I exit like this I track the P&L difference when PTF gives the exit signal and for the past 8 months this has increased my P&L on well over 80% of the trades. Mechanically it has to increase the P&L except for gaps well beyond the MA line.
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You're right BD1. I jumped the gun. Posted without considering all the facts. You have a proven methodology that works for you as your posted track record shows.
 
Sold IP @ 26.64 (6.3%)
Covered SPP @ 4.41 (-1.85%)

Sold FCS @ 10.6 (4.33%)
Covered CY @ 12.36 (-.41%)

16 trades posted to forum:

13 wins
3 losses
 
Quote from coreed:

Sold NOV @ 43.10 (-2.99%)
Covered FTI @ 61.18 (-1.61%)

18 trades posted to forum

14 wins
4 losses
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Thanks for posting your trades. Please continue. I am papertrading them as well.
 
I was travelling and didn’t have access to internet. That is why I missed few exit signals. I have closed following trades today (all numbers based on 10000 investment, no commission):

AMR – DAL for profit 651.55 USD
DFG – MET for profit 462.93 USD
EGLE – ESEA for profit 846.56 USD

Still holding following pairs:

DRQ – NOV
BEAV – GD
AMB – PLD
BR – LPS (this one had already profitable exit, but I missed it).

Stats:
Opened pairs so far: 8
Closed for profit: 4
Closed for loss: 0

M.
 
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