I know how to play this strategy. This pairs trading strategy is based on the concept that two highly correlated stocks will eventually converge back to its historical correlation after a divergence. But those who use this strategy with correlation will eventually blow out their account. Although you need to form a pairs with correlation, you need to use volatility measure, not correlation measure, to initiate trading. Chan has no proven record of producing consistent profit with his strategy because he doesn't have a good understanding of market characteristics. No wonder why he had frustrating time with his industries jobs and still haven't learned from his lessons and his research is way off the right track.
Agree. It's a bit ironic to be told by a guy who has to sell books to make a living that momentum based strategies are inferior to mean reversion.
Yes, I do. I use the high frequency traders arbitrage strategy ( or something similar) - which is also known as speculation - lucky to have it as my first PhD thesis topic.