Your lack of understanding and respect for getting through Level of the CFA Curriculum shows you have no idea what you're talking about, nor does it require any further response as evidence by PCLN's performance today.
No experience....yeah... it's quite naieve that you haven't even tried to google my name yet. But no matter. This system is an event driven system. It is not technical, quantitative, or fundamental analysis. Currently, the first trade I've seen was in PCLN short at 166 on November 5th's open, and the reason I post numbers is so people see my <b>exact</b> calculations. I'll run through them again, just so we're clear about the current walk forward results of your system: Short PCLN at 166 now at 204.22 on 11/5/2009. Simultaneously going long SPY at 105.66 now at 109.59. Portfolio level reutrns are <b>exactly equivalent with a 10% size to the following</b> 0.1*(166/204.22-1)+0.1*(109.59/105.66-1)=-.0187151+0.0037195=-1.49959%. Let me annualize this so we have a better context. (1-.0149959)^(360/4)-1=-.7432949 is your annualize returns in decimal form. For those of us that don't think in decimal form: Perhaps we should arrive at the current APR of your system: <b><i>-74.3% APR</b></i> The reason it helps to put a system's performance in context is because it needs to be so that we don't misrepresent performance. The APR above is what I'd estimate is slightly below the APR, but I don't believe the system as it was laid out on page 1 is any edge at all. Still got another 20 days, but maybe PCLN will drop like a rock, right? Yeah, I guess if I were you I'd be putting what 50% into each trade. Let me calcuate what that return annualized would be: -100%. Good thing you can only lose your whole account. The actual value is -.999 or -99.91% exactly. Got to go take care of some business. And if you didn't notice, I was spot on calling the market stupid for dropping recently, and I did make money at it, unlike the system here. No one is better at pairs trading than I am. I would probably see so many things wrong with your pairs models that it doesn't benefit me to give away secrets.
Trying to generate a "APR" on a system that will generate roughly 3 trades per month, that is 30+ trades expected in a year, based on one of those trades not even run to completion is retarded. Cary on.
Definitely it's not a big enough time span, I'm thinking by next month we'll be around -20%. Note that I did mention it was below where it should be, but it will still be negative, and 30+ trades in a year is not likely.
There have been 311 insertion/deletion individuals or pairs since Jan 1, 2000 according to the S&P site. How do you figure 30 in a year is unlikely? I have the funny feeling you didn't bother to look at the S&P site, which would explain a LOT about your posts in this thread up to this point.
It doesn't matter. Most of those are in two particular years. so 311 in 10 years, 30 in a year. No, the market is stable currently, so it will not be as frequent.
Hmm, I went and spot checked your assertion by counting them for 2004 (a very stable year), and got 22 which isn't that far out for a random process that produces 31 on average. So again, it appears you haven't bothered to look at even the most basic aspects of this method. If your posts were mine, I'd be embarrassed to have my name next to them.
How badly can you get blown out by short selling a stock for about a month? What about a week? If you don't have a lot of capital to begin with, you have to allocate a large percentage to a single trade. So if your 20% allocation blows up 500% you would lose your entire account. Does anyone know how often things like this happen? Have you personally seen anything like that happen? Thanks
This aspect of the method has me worried - being short with no stop for a month is not something I could stomach. In practice, of course, you do have a stop at the margin call point. But I would think this method would need to be modified to include a more reasonable stop before I would trade it. Such a stop might also improve results - hard to say.