Pair Trading Strategy Journal

Discussion in 'Journals' started by jonnysharp, Aug 18, 2008.

  1. renton

    renton

    Sounds like those numbers are a little large... I thought jonnysharp was trading around 3 or 4 pairs when he started this thread with an initial investment of £30k.

    Maybe if these figures are correct, then spreadbetting is a good way to go?
     
    #1051     May 19, 2009
  2. saico

    saico

    I think most of us here including Johnny who actively use PTF have at most 8-15 open pair positions on average. To find 5 new quality trades each and every day is way to much of what you could expect.
     
    #1052     May 19, 2009
  3. Dr Who

    Dr Who

    Sure, I think 5 may be too many to hope for. My own pairs seem to provide me with about 3 pr day on average. But with the average trade lasting about 9 days that would mean 27 pairs or 54 CFDs open at one time maximum. This still means around £100K account.
    So, its a balancing act if you have say a £50K account like I do. Do I trade less frequently but at better prices aka CFDs or do I trade more often but at a lower volume (thereby spreading my risk) but at poorer prices aka spreadbetting ?
    The problem going the CFD route too is that ones exposure is going to be that much larger if things go the wrong way and its more likely I'd jump ship because of the heat generated.
    If IG Markets didnt have the £10 minimum commission at either end I'd definitely go the CFD route. Tradefair will be opening a CFD exchange in a few months time and I've been invited to beta test it, so it'll be interesting to see what they have to offer. If they arrange it in a similar way to their mother exchange, Betfair, it could be a real alternative to what we have on offer at the moment.
     
    #1053     May 19, 2009
  4. CBuster

    CBuster

    I hear you mate. The costs of dealing in the UK and Europe generally are WAY above trading US stocks.

    I trade prop so the deals on offer were a little better. But even then I've had to hassle them for months to get my fees down.

    Out of interest, how are you putting your pairs on? Do you just wait for the ratio to look roughly right and then put on the trade, one leg at a time? I've been experimenting a bit and have noticed I can get some fairly wild slippage trading like that.

    I've now developed some software to help me automate the process but there is still a lag which leads to slippage, esp in faster mkts.

    I only mention all this to say that, if you are going to get picky about your comms (as you should!) then do not neglect execution lag as it can have as big (or bigger) impact on total costs, depending on how you do it....
     
    #1054     May 19, 2009
  5. Dr Who

    Dr Who

    At the moment I'm using their DMA interface which seems to be working OK and I can usually get inside the spread without a problem. Then again, I've only done a few so far. I like to be fairly active so I think I will probably take a slightly less advantageous price in order to trade more pairs and go the spreadbetting route for the moment. Until the new Tradefair exchange starts up and I see what they have to offer. Its horses for courses and I dont think I'm funded well enough at the moment to trade the way I'm happy with going the CFD route.
     
    #1055     May 19, 2009
  6. Dr Who

    Dr Who

    While I'm talking about their DMA interface I was watching a couple of CFDs just after the open and it seemed like there was a bot or two working the spreads when they were wide enough. This is what I do for my main income at the moment but on Betfair markets, so its interesting to see the CFD markets are not immune to the same practice :)
     
    #1056     May 19, 2009
  7. saico

    saico

    27 pairs is still a lot. I mean, who forces you to open that many positions? You will be more than fine with the half of it, trust me.:D Why not going with a real brokerage firm?
     
    #1057     May 19, 2009
  8. Trade exited yesterday

    Sold ALL @ 25.85
    Covered CNA @ 14.72
     
    #1058     May 19, 2009
  9. Closed two pairs;
    BDX:BCR @ 0.9031 from 0.9194
    MOO:IGE @ 1.2810 from 1.2675, took a loss because they are ETFs on different industry and it seems more like a divergence.
     
    #1059     May 19, 2009
  10. Exited trade for small profit

    Sold AXS @ 24.63
    Covered PRE @ 67.08
     
    #1060     May 19, 2009