Equity Pair or Portfolio, Trap Strategy

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

  1. t1ck3r

    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