Hi guys I'm trying to gather information on money management strategies involved in trading the difference between Brent and WTI. I have not managed to turn up information besides a vague idea that equity pairs trading would be roughly the same. I put together some systems on my own along the premise of layers (i.e. each 50 point move away from the standard deviation I enter X contacts. I put together some drawdown projections based on the largest deviations that have occurred in the past to ensure I don't tank my account (unless we set a new high much larger than before.) Does anyone have any information to share about what I have written above? Perhaps different strategies? I have considered not using a static settping of 50c and instead using something based on statistics to optimise profits, perhaps having larger position on often seen deviations or tighter layers x points away from the standard deviation. I didn't hear about spread trading BTW, I just noticed two correlating charts one day when I was doing some investigations in to arbitration. So in short I have no source of information, I have been working this out as I go.
Thanks but I have already read that thread. I've been trading this live for the past 3 months and have a ~20% return, but I feel that I'm my techniques are overly simple and there is to much guesswork and discretion involved. All I do is watch the overnight trading and watch for a small (10c) depression that occurs at the same time each day for a good entry, then wait out the reversion towards the zero point. It works but some times when I'm wrong it locks me up for a week or so. I also think that I should probably stagger my entries in to smaller portions over the deviation range.