Equity Pair or Portfolio, Trap Strategy

Discussion in 'Automated Trading' started by t1ck3r, Jan 5, 2010.

  1. t1ck3r


    We've recently started using stop entries for portfolios that have gone beyond 1 standard deviation. Idea is to catch them upon their return towards fair value. (VWAP & Previous Close)

    Example of a trap:

    Portfolio: CAT.DE
    Weights: 1, -1
    Previous Close: 2.49
    Standard Deviation: 1.038 (14 day closing px)

    When it travels beyond 3.54 a sell stop is placed at 3.44 and a limit to buy at 3.34 to target making a dime. Using stealth orders, wave sizes and priority of execution, traders are able to limit slippage enough to go for dimes! They do this across 40 or more portfolios at a time.

    Thought I'd share some ideas...Happy Trading ..greg
  2. 2 many morons going for dimes and less has made trading a pain in the ass