Pairs Trading Strategy Model
- Thread starter Neutral_Al
- Start date
Quote from seisan:
So, who's first up with a question or contribution sometime today.
Too many sharp heads on this thread to leave the above strategies just layin' there on the table...
OK, lets start basic then,
You told in a prior post you do all kind of trading (spreads)
I'm a retail trader , trading spreads since 2 years now, and I came to the conclusion that my returns are a lot better when only using EOD data and trading only on a daily timeframe (Might take some intraday stops / profits)
So I created my own set of pairs that I follow on a daily base and so far this has been going great.
However, I'm always looking to improve my results and for me I think the way is to optimize my entries / exits (not changing my timeframe)
- What do you use for your entry /exit signals ?
- How do you get your enties / exits, is there a way to optimize ?
Thanks for the question H2O.
My entries and exits are determined using technical analysis, supplemented by fundamental analysis. The common plays I make are based on support numbers, resistance numbers, bollinger bands, and standard deviation plays.
A couple things to remember: a lot of traders are gripping about the lack of volatility in the market (the VIX being around 20 and may go lower), what we trade is predictability, not volatility. You can have all the movement in the world, but if it is un predictable you can't make any money trading it. Give me less volatility and more predictability any day. With more predictability I just increase my size to make more money.
How do we get more predictability? Look for compounding probabilities. This is where I use fundamental analysis to support my technical trading. I am not willing to hold positions for extended periods of time without having the fundamentals in my favor.
As far as what pairs I trade, they change from week to week. I look at around 100 pairs every weekend to find the top 10-15 I want to trade. Some common pairs I trade include SBC BLS, MWD MER, FD TGT, VIA.B CCU. You can get a whole list if you sign up for our website www.pairtrader.com.
Hope this helps,
Cheers,
Darren
My entries and exits are determined using technical analysis, supplemented by fundamental analysis. The common plays I make are based on support numbers, resistance numbers, bollinger bands, and standard deviation plays.
A couple things to remember: a lot of traders are gripping about the lack of volatility in the market (the VIX being around 20 and may go lower), what we trade is predictability, not volatility. You can have all the movement in the world, but if it is un predictable you can't make any money trading it. Give me less volatility and more predictability any day. With more predictability I just increase my size to make more money.
How do we get more predictability? Look for compounding probabilities. This is where I use fundamental analysis to support my technical trading. I am not willing to hold positions for extended periods of time without having the fundamentals in my favor.
As far as what pairs I trade, they change from week to week. I look at around 100 pairs every weekend to find the top 10-15 I want to trade. Some common pairs I trade include SBC BLS, MWD MER, FD TGT, VIA.B CCU. You can get a whole list if you sign up for our website www.pairtrader.com.
Hope this helps,
Cheers,
Darren
It was asked earlier if there are any books that can be recommended, if you go to www.pairtrader.com you can order the Art of the Arb Trading Manual. This is a comprehensive book from real traders who are actively trading pairs on a daily basis. The book covers everything from business plans, how to handle blowups, technical analysis, handling problem pairs, pair weighting, M&A pair trading, and generating pairs. It is the book for the course that Rob Friesen teaches. I used this book and this course to lead me into the trader that I am today.
Even better than the book is the mentorship. I have been blessed trade beside some top traders who are willing to share things with me, and it made all the difference. I can stress highly enough the benefits that you get from talking and seeing someone actively trade the strategies you are interested in.
Cheers,
Darren
Even better than the book is the mentorship. I have been blessed trade beside some top traders who are willing to share things with me, and it made all the difference. I can stress highly enough the benefits that you get from talking and seeing someone actively trade the strategies you are interested in.
Cheers,
Darren
pairs trading is losing its effectiveness as more and more people are doing it, that is why people like darren are mass marketing it through websites and books. don't get me wrong, you CAN make money pairtrading, but if it was such a great strategy, why are there people trying to get rich off marketing it instead of trading it??