Pairs Trading On a daily basis

so is this somewhat in the neighborhood of what you traders are talking about.......today I wanted to buy IMCL & TARO while shorting PFE & SGP.....it would have turned out to be a pretty good intraday play as IMCL has been on a solid uptrend, TARO earnings momentum......while PFE and most of the drug companies have been pulling back the last few days. Even BRL after announcing a 3-2 split could not muster much juice...........
 
Quote from NYSE Trader:

I find momentum stocks and look for correlated stocks to pair them up with...trade the stocks for momentum/scalping and put on the other side only if you get caught--then trade out of the pair for a small profit and continue. The trick is to only trade the lead stock on the side that makes sense and with the spread chart at the extreme of its average daily range.
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This is the Bright way. I do not mean that they invented it, but one of the way they train you to trade pairs.

nitro
 
Quote from nitro:


This is the Bright way. I do not mean that they invented it, but one of the way they train you to trade pairs.

nitro
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The question isn't who teaches it, but does it work? True, Bright may not have the best reputation, but they do have some "bright" traders doing a lot of interesting research into pair models. The short-term pair trading serves my trading style...I got tired of building positions in pairs, periodically getting blown out, paying $$$ for overnight costs, etc. Nothing worse that waking up in the morning and finding one side of your pair is on the wrong side of an upgrade/downgrade...
 
seems to be the most logical - margin offset, leverage and specific event driven equities. logic, of course, often does not rule the day! i 'll check your thread.

thnaks
 
Quote from NYSE Trader:



The question isn't who teaches it, but does it work? True, Bright may not have the best reputation, but they do have some "bright" traders doing a lot of interesting research into pair models. The short-term pair trading serves my trading style...I got tired of building positions in pairs, periodically getting blown out, paying $$$ for overnight costs, etc. Nothing worse that waking up in the morning and finding one side of your pair is on the wrong side of an upgrade/downgrade...
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And many misunderstand doubling up with good trading (when doing pairs).

But any trader still has high probability of making good money doing it. It boils down to avoid the 0,5% chance of getting into a neverending trending spread (like pvn/cof (?)). And who knows beforehand???
 
I'm not a pair trader so I can only comment on the theory, however, I just finished reading "When Genius Failed," the story of Long-Term Capital Management. When they got away from bond arbitrage they started hedging equities, basically very large-scale pair trades. The problem was dependency on price inefficiency. Once enough people become savvy of a particular pair or arbitrage opportunity the profit potential decreases as pricing becomes more efficient. I would guess that even on the short term that could be a problem with pair trading. Once enough people figure out an inefficient pair the pricing will become more efficient and the pair less profitable. YMMV.
 
Quote from NYSE Trader:

I find momentum stocks and look for correlated stocks to pair them up with...trade the stocks for momentum/scalping and put on the other side only if you get caught--then trade out of the pair for a small profit and continue. The trick is to only trade the lead stock on the side that makes sense and with the spread chart at the extreme of its average daily range.
More...

ive also had most my success in this arena wtih the crutch stlye... i would just caution someone to realize their time frame before entering a pair, i.e don't go in with an idea and range that is a day or two and then turn it into to a pair investment of several weeks if it starts to trend, or be savvy enough to see the trend and go w/ it.
 
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