Pairs Trading Strategy Model

Such is the nature of reversion trading strategies, you make $ 8/10 but the other 2 times you lose most if not more of what you make. Commodity pits are littered with stories of traders doing these spreads. I personaly clerked for an oil trader who went through the cycle at least three times doing reversion strategies in the crack spreads. Not for the faint of heart and definitely not less risky than straight up trading, as some pro firms might want you to believe. Good luck
 
Quote from howellpar:

Large Capital Listed pairs are the only way to survive and make a living trading pairs. I've learned the hard, expensive way!


Not true
I do agree that there is money to be made trading large listed companies (I have hit just about every industry out there), but I have been profitable trading nasdaq for years. I think the best trade is based on fundamentals (buying the strong stock, shorting the weak stock in your group) but I think that strategy is a long term strategy that involves some big drawdowns. Bottom line is that there are a million ways to skin a cat, you just have to find which way fits your style the best.
Homer
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after our hit in feb we made it back in march.

2002 03.12.02 100.00
Dez 101.98 1.98%
2003 Jän 104.08 2.06%
Feb 102.14 -1.86%
Mär 104.10 1.91%

working on our understanding regarding performance drivers. high dispersion and high vola are best for us. sharpe (3%) of 2.0 so far in real trading is satisfaying and in line with expectations, yet the timeframe is still too short to tell about the quality of the approach.

one of the next things will be selected pairs intraday.


peace
 
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