Pairs Trading Strategy Model
- Thread starter Neutral_Al
- Start date
Also, go to www.quote.com and use their live charts for free. You can put in A - B or A / B or even (A * X.Y) - B. Just make sure to leave spaces in between any operator.
Royce
Hi man,
I find that despite being market neutral, pairstrading is still dependant on the direction of the market when you trade pairs based only on correlation. For example, the pair TXN/MWD is highly correlaed over the past 2 years. However, TXN will always underperform MWD in the downtrend and outperform it in the uptrend.
If you trade pairs in the same sector like LLTC/MXIM, XLNX/ALTR, etc., market direction matters less.
Some pairs like FO/ITT are affected neither by directional changes nor by volatility.
I closed BK/MEL today with a nice profit. It is getting too close to 40DMA, and it looks like we are turning south, so I expect BK to underperform.
I also finished my model. It provides me with correlated pairs, extreme RSI, 10DMA cross towards 50DMA. It also calculates desired SD from the mean. Different samples test from 75% to 87.8% profit.
Now I am ready for REAL TIME.
Does anyone know a data provider that can stream S&P500 reliably and affordably?
Al
Neutral AI, Royce,
I find this rather exciting. we finished our model as well and will start trading next week. we use a pattern recognition tool for the analysis of the spread.
data
We use CSI&Bloomberg for data history. Both seem to be pretty reliable, delivering dividend adjusted data, although CSI struggled during last days to adjust T for the 1:5 split. But usually they are doing quite well. If you need data split- and dividendadjusted for longer periods than about ten years, you get a problem since CSI cuts numbers to two digits after the comma. that means that if you look at adjusted data back into the sixties, that some stocks could only move by 5% - everything else falls out of the tow digit-borderline. Nevertheless, they offer excellent price/value ratio for their service. the database is stable. we have been using them for over year now.
for realtime data we found eSignal quite sufficient.
Tickhistory is nice from quote.com.
I would like to stay in contact with you guys, if you do not mind. Have you heard about a hedge fund "whitebox". they are doing pairstrading using technicals plus fundamentals.
peace
I find this rather exciting. we finished our model as well and will start trading next week. we use a pattern recognition tool for the analysis of the spread.
data
We use CSI&Bloomberg for data history. Both seem to be pretty reliable, delivering dividend adjusted data, although CSI struggled during last days to adjust T for the 1:5 split. But usually they are doing quite well. If you need data split- and dividendadjusted for longer periods than about ten years, you get a problem since CSI cuts numbers to two digits after the comma. that means that if you look at adjusted data back into the sixties, that some stocks could only move by 5% - everything else falls out of the tow digit-borderline. Nevertheless, they offer excellent price/value ratio for their service. the database is stable. we have been using them for over year now.
for realtime data we found eSignal quite sufficient.
Tickhistory is nice from quote.com.
I would like to stay in contact with you guys, if you do not mind. Have you heard about a hedge fund "whitebox". they are doing pairstrading using technicals plus fundamentals.
peace
Hi man,
Could you please explain what is the pattern recognition tool that you are using.
Al
man/ veeru
I have read Talebs book and recomend it.
Most sites/ people fall into either trader or quant gategories but elite trader strikes a good balance. contingencyanalysis.com is very quant biased.That is you need to spend seven years doing a phd to prove two indices are negatively correlated before we can make any scientific statements - by which time we have forgotten about making money -as we have been distracted into other interesting branches of mathematical analysis. Cynical , but there is some truth.
We must remember we are playing the percentage game like the gambler to know enough about maths but noy too much!
After all- you dont need to know about the physical laws determining movement of objects through space to be a great snooker player- infact it is more likely the less an individual knows about physics the better the snooker player !!!
Perugino
I have read Talebs book and recomend it.
Most sites/ people fall into either trader or quant gategories but elite trader strikes a good balance. contingencyanalysis.com is very quant biased.That is you need to spend seven years doing a phd to prove two indices are negatively correlated before we can make any scientific statements - by which time we have forgotten about making money -as we have been distracted into other interesting branches of mathematical analysis. Cynical , but there is some truth.
We must remember we are playing the percentage game like the gambler to know enough about maths but noy too much!
After all- you dont need to know about the physical laws determining movement of objects through space to be a great snooker player- infact it is more likely the less an individual knows about physics the better the snooker player !!!
Perugino
Everyone please advise me when you enter a pair,the stocks, the size of your trade, and your equity balance. I will then proceed to deliver as much pain to you as is necessary to force you out of your position.
Pair trading combines three of my favorite pasttimes:
1) Trading
2) Gambling
3) Smoking crack rock
I've seen the gobbledygook study purporting to support this strategy, and for my money---it only works well around the opening.
I know plenty of people who make big dough using this strategy, but ALL of them are at risk of blowing up( the non-terrorist kind) at many points in time.
God bless 'em. They need it.
Pair trading combines three of my favorite pasttimes:
1) Trading
2) Gambling
3) Smoking crack rock
I've seen the gobbledygook study purporting to support this strategy, and for my money---it only works well around the opening.
I know plenty of people who make big dough using this strategy, but ALL of them are at risk of blowing up( the non-terrorist kind) at many points in time.
God bless 'em. They need it.