Pair Trading Strategy Journal

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

  1. saico

    saico

    New trade taken premarket.

    Long AU @34.78
    Short GFI @11.22

    I like the WMB-MMP trade alot too, but will wait for some better entry prices since my extremes arent reached yet. Of course there is the risk of missing a good one by doing that.
     
    #1851     Feb 24, 2010
  2. saico

    saico

    The thing I dont like at WMB-MMB pair at the moment is, that the spread makes new 12 months lows. That would make me atleast cautious on the trade.
     
    #1852     Feb 24, 2010
  3. BigSalad

    BigSalad

    BD1, a question if I may: Are your percentages return per trade or return on capital used? People are often unclear about this, and the difference is significant.
     
    #1853     Feb 24, 2010
  4. Do you trade reversion to mean (rtm) with pairs, or is it a continuing trend. I've observed two schools of thought:
    (1) RTM on cointegrated stocks
    (2) Anticipate that the divergence or convergence will continue with the given pair.

    Fundamentally, it's always better in the long run to go long with the better company and go short with the weaker company. However, determining which stock is the stronger and the weaker is often times a bit tricky since yesterday's performance is no guarantee of future outcome...

    Walt

     
    #1854     Feb 24, 2010
  5. BD1

    BD1

    Bigsalid and jones:

    I am calculating individual trade return then an average of all wins (losses). So if I am investing 10,000 for each pair then my trade return (p&l) is trade return/loss divided by 20,000.

    I am using the pair trade finder software and sticking pretty much to it's standard setup. It is just a simple revert to the mean based on 14 day MA. I avoid earnings releases and other big news items. Average trade length is 6.4 days. I have a time stop loss of 10-12 trading days. Most trades are losers after 8 trading days. I average about 6 trades a week with anywhere from 2 to 15 trades open at a time.
     
    #1855     Feb 24, 2010
  6. Thanks BD1,

    Do you practice averaging down on your trades that are going against you?

    thanks,

    Walt

     
    #1856     Feb 24, 2010
  7. BD1

    BD1

    No
     
    #1857     Feb 24, 2010
  8. coreed

    coreed

    Could you define your extremes Saico?
     
    #1858     Feb 25, 2010
  9. saico

    saico

    New trade.

    Long BEAV @25.04
    Short GD @71.21
     
    #1859     Feb 25, 2010
  10. saico

    saico

     
    #1860     Feb 25, 2010