Yes it is, it takes work, but can be very profitable.
Don
pairs trading
- Thread starter renegade trader
- Start date
Yes it is, it takes work, but can be very profitable.
Don
i asked if anybody can give any advice on pairs trading. I DONT CARE FOR SPAM by DON BRIGHT an The other guy with the website
Is anybody trading pairs right now? (I know the BRIGHT guys are.)
Is anybody trading pairs right now? (I know the BRIGHT guys are.)
these arent snippy comments.
I enjoyed trading pairs because there was so much you can do with them. for example
1. leg into a pair
2. legging out of a pair
3. not having to put the other side on if the first side was a winner.
4. in other words you had many outs
i am wondering if individuals on this board are actually trading pairs right now. and if so what are some of the pros and cons in this environment
A question for people who trade pairs...let's say you have a list of 30 pairs that you have been watching and they are all profitable (within your trading strategy), but you want to pick the 5 best to trade. What would you use as a gauge to determine which are the best?
Overall Net profit
Win %
Expectancy of Profit Factor
Avg profit
Median profit
Std Deviation of profits
Avg Win/Avg Loss
Or maybe something I am missing.
Overall Net profit
Win %
Expectancy of Profit Factor
Avg profit
Median profit
Std Deviation of profits
Avg Win/Avg Loss
Or maybe something I am missing.
Okay fair enough..to answer your questions:
1. Within the last year the pair trending environment has gotten extremely trendy...I use a lot of percentages of ATRs, standard deviations, ect. all of which that generate specific buy/sell signals for entering trends. I've had to adjust these considerably because there's been moves in pairs that occur regularly now that i never thought possible. I was also fading for the most part which is not something you want to do now, you really have to go with the trend.
Also, as i mentioned lately that I was fortunate to be on the good side of some big news engines (e.g. i was long hltmar when blackstone bought it out), so now i really focus a lot on the fundamentals of the pair, relative strength, discount/premium ect.
Where as before there would be a greater margin of error for entering positions, so to answer number 2 i would say you have to pay a lot more attention to legging into a pair with stop losses or some kind of specific rules for limiting risk. Each pair trading style is unique i was a heavy scalper, but switched to the investor and scalper trader, always holding positions overnight and doing what i could to lock in production daily.
In a way I like the new pairs trading environment because although i've found it tougher and had to make a bit of a transition, it's rewarding to those that put in the effort.
Well if you had a list of 30 profitable pairs, why would you limit that down to 5? You're removing diversification...i just look at total net/loss profit per pair as a measure to determine how good it is. It's very possible that a pair i've done poorly on others are trading it well, but for whatever subconscious reason it doesn't fit with my trading style so i get rid of it. I also have a short list of pairs that i'm trading, but it's constantly being altered, ones dropped new ones added. As long as i'm makiing money on a pair I keep it, as simple as that. When i stop making money on it i look into why that's happened and if i can't adjust my trading to make it profitable again i dump it (but will revisit in time down the road).
It's a hypothetical question, trying to discern what you consider to be most important factor when picking pairs to trade. Assume you had 30 pairs, traded them all the same way, and the statistics for each (net profit, avg profit, etc...), and no fundamental background for the pairs, just the profit numbers. How would you pick the 5 best with that data?
I can already say that total net profit would not be a great idea b/c you could have one day (like a buyout) that you may have been in the right side of (or wrong side of) which would skew the net profit in one way or another.
I can already say that total net profit would not be a great idea b/c you could have one day (like a buyout) that you may have been in the right side of (or wrong side of) which would skew the net profit in one way or another.