Pairs Trading Strategy Model

Quote from mschey:

Pairs trading is dead...
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I think one problem here is that people often define for themselves the meaning of something.. pairs trading clearly means different things to different folks... its impossible to declare anything definitive this being the case really... some regard it as 'statistical arbitrage' or something... whatever the hell that is.. dont tell me please! sounds way to complicated for me.. and anyway there is little to compare between intra day pairs trading and swing based pairs trading.. so many other examples also..

For myself, I am now trading a portfolio of sector based pairs.. chosen by basic ta for strong longs and weak shorts... swinging as long as they take... and have been doing better this year since I started than any of my trading previously, which was mostly daytrading..... so its too varied in my opinion to draw any meaningfull conclusions... altho it is clearly true that it has little interest to people here.. who seem mostly devoted to swift trading and rapid profits.. no idea what happened to those who were posting earlier, hopefully they have thriven and prospered and are too content and happy to bother posting here.. :)
 
Quote from jimmyz:

What is happening with the pair traders this year. I haven't seen any additional info from anyone.

I doubt the edge has fully disappeared, but I was just looking for an update in the forum....Neutral Al?

Nitro? have you come back into the fold?
DaveN....?

Anyone......bueller?
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up 1,9% for first quarter. not much downside, not much upside. boring, boring.
 
Quote from mschey:

Pairs trading is dead...Just look at spread charts. There is no mean reversion, they start moving in one direction and continue to do so day after day after day. This makes it nearly impossible to trade pairs and make great money. I think automation and low volatility have taken much of the edge out of trading pairs.


The good news, if you are flexible and change your strategies to adapt to current market conditions you can make great money. I am making great money by taking advantage of the lower volatility and taking position trades, either long or short.

Mike
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In PairsTrading you just trade pairs of something that used to behave similarly and at the moment for some reason there is a gap in them. Let’s concentrate just on stocks (though you also can trade options, futures, currencies… whatever).
Even just with the stocks there could be numerous if not infinity of possible strategies – when you open the position? when you close it? and what you actually do when there is a gap? You may guess that this particular gap will shrink, but another one will get bigger, so you can play trend in that case.
So, if some particular sub-strategy does not work, one can’t say the whole PT does not work. No – just THIS strategy does not work. And maybe even never worked – have you tested it before going into it?
Here is a latest article on CBOT about PT.
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1070+18827,00.html
 
I know lots of people who backtest and develop systems, and not one of them makes any money trading. On the other hand, my actual trades demonstrate that I having many winning strategies, that produce consistent, daily, results. And that is all that really matters!


Mike
 
Quote from mschey:

I know lots of people who backtest and develop systems, and not one of them makes any money trading. On the other hand, my actual trades demonstrate that I having many winning strategies, that produce consistent, daily, results. And that is all that really matters!

Mike
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So, how is it dead then? :confused:
Result is all that matters, right?
 
Hi all,

I saw the thread active again. Here is my update...
I finished the year with 24% gain doing pairs trading exclusively. This year I am up 7.4% so far with the Sharpe ratio of 5.
As far as death of pairs trading, I think it is more alive than ever. When I started a couple of years ago, I was able to find only a couple of articles on the subject. Today there are dozens of articles and books on trading pairs. Even the main stream Industry publication such as Futures Magazine features an article on pairs trading this month. http://www.futuresmag.com/library/contents.html
Get a copy, educate yourselves…
What looks dead, however, is the action of pairs trading. It is slow and boring. Just the way I like it.

Good luck to all,
Al
 
Quote from Neutral_Al:

Hi all,

I saw the thread active again. Here is my update...
I finished the year with 24% gain doing pairs trading exclusively. This year I am up 7.4% so far with the Sharpe ratio of 5.
As far as death of pairs trading, I think it is more alive than ever. When I started a couple of years ago, I was able to find only a couple of articles on the subject. Today there are dozens of articles and books on trading pairs. Even the main stream Industry publication such as Futures Magazine features an article on pairs trading this month. http://www.futuresmag.com/library/contents.html
Get a copy, educate yourselves…
What looks dead, however, is the action of pairs trading. It is slow and boring. Just the way I like it.

Good luck to all,
Al
More...


that is very, very good figures. you are trading systematic? intraday?

good trading
 
Hello,


24% of what amount of capital, if I may ask? thanks



Quote from Neutral_Al:

Hi all,

I saw the thread active again. Here is my update...
I finished the year with 24% gain doing pairs trading exclusively. This year I am up 7.4% so far with the Sharpe ratio of 5.
As far as death of pairs trading, I think it is more alive than ever. When I started a couple of years ago, I was able to find only a couple of articles on the subject. Today there are dozens of articles and books on trading pairs. Even the main stream Industry publication such as Futures Magazine features an article on pairs trading this month. http://www.futuresmag.com/library/contents.html
Get a copy, educate yourselves…
What looks dead, however, is the action of pairs trading. It is slow and boring. Just the way I like it.

Good luck to all,
Al
More...
 
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