Pair Trade Finder, $49/mth. Great for US stocks I believe, not sure about futures and other stuff. 30 day free trial available. I'm looking into this as well.
I have this bad habit of buying books I Might want to read someday. Last year I bought Alpha Trading by Perry Kaufman which is about pair and spread trading. Just started reading it so can't tell you how good it is yet. I bought his earlier book New Trading Systems and Methods when I was still working, took me 5 years to start reading it. LOL
Well, it's right here under our noses. This thread was started by Johnny Sharp exactly four years ago with his use of PTF which he displayed (above) six days after starting this thread. You want to know about PTF ? You have many hundreds of posts to comb through on this thread to find ample info on it by quite excellent traders either using it or talking about it. Pairs trading was described in this thread excellently by YOBO who posted immediately after Johnny posted his illustration (above) and was on this thread for years. He explained the strategy using conversions and diversions, Standard Deviations, Relative Strength, correlation, and co-itegration. These are the components to PTF, the brain child of a Canadian firm. To this date, I have never used PTF or any other software to do my pairs trading. But I learned much about pairs trading from this thread. I had coincidentally self invented pairs trading for myself the same year this thread began. I was excited to find this thread; I had never read EliteTrader before. I was actually searching for something else when I stumbled upon ET and this thread. My reflection on my last 4 years (the last two I have done very little trading due to personal circumstances): I speculate it attracts many who subsequently leave it because it is not sexy enough. Others who have been widely and deeply involved in it could make a more accurate assessment than me. I see this activity as consistently successful with regards to the exceptionally high ratio of gains to trades made; however the individual gains generally don't water one's eyes. Rather, I see it as the tortoise winning the race against the hare: making money and not losing it. Over the long run, you earn bragging rights for consistency of gains when trading this way. Even so, I suspect the vast population of traders are looking to hit for extra bases, not high probability, successful trades resulting in singles, definitely some doubles, and the occasional triple and hard-to-come-by home run. I can only speak for myself. With LOTS of money, I would get into simultaneously LOTS of trades. My net result would be over time exceptionally high ratio of booked trades that ended with gains compared to number of trades put on, but it would take LOTS of money to result in a respectable amount of absolute dollars gained. One of the limitations is prudently keeping money in idle reserves not earning anything. It has to be there in order to take advantage of the benefits of "layering on to an existing, open trade" when called for. For me personally, layering on is where my biggest money has come from. I find if I annualize my returns on trades (which accounts for time in a trade), there is a wide dispersion of results, but the median of all annualized returns of trades is respectable. This suggests a lot of things: Safe. Methodically grinding. Being content with a small ratio of trades with big success relative to number of trades put on. In a word, CONSERVATIVE. I have found that over time experimenting, I can earn a BIG gain from a trade in terms of absolute numbers of dollars resulting from it by leaving the trade open long enough to allow for maximum potential to be realized. Of course, more time pulls down the annualized return on the trade while the larger amount of absolute dollars gained pushes the annualized return upward. The trade off is many smaller trades that could have been harvesting small gains over the same period of time never occurred. Which means what ? Well, what is your style ? Either way works: Lots of easy scalps but with lots of time monitoring the position every day, or eyes off the monitor and hands off the trigger intra-day in a style that allows for doing something else you like to do in life with only a daily look at the monitor. Johnny Sharp preferred the latter. In fact, his executions were done end of day. What you are reading from me is one person's experience and extrapolating from it an overall judgment of pairs trading. There must be lots of exceptions from traders that make up a small proportion of the population of traders. But intuitively I think I am right in my generalization. I would love to have a thread on this subject alone. There were many on this very active thread over the years who would have excellent insight on this subject. Among them would probably be the big money makers. But it would be a curiosity thing, and probably have a limited, constructive purpose. But at least it would let us know where the chips lay.
This would be pretty interesting subject matter for sure. I am a firm believer in letting profits run. My last stat when trading stocks was a 26% annual return with a 38% win rate. But some would prefer many small wins for sure, and I really do not believe one size fits all. I've just started looking into spread trading (futures), because I believe(d) being in Thailand I do not get enough news about US Stocks to trade them well. Then again I remember reading Johnny saying he did not look into the fundamentals of the stocks at all, only the stat arb. So based on that I am keeping an open mind and continuing to look into this.
Excerpt from Kaufman's Alpha Trading; Time Perspective We need to decide if our trading should target a few big profits or many small ones. My own preference is for many faster trades, even though a series of small losses could total the same as one large loss generated by a longer-term strategic trade. With faster trading, it is possible to have more consistent performance because the individual trade risk is smaller. If you hold a trade for a long time, then the risk increases proportionally (but not linearly) with the holding period, so it is not possible to have a long-term trade with low risk. More trades also give greater statistical confidence. If we think of the conclusions given in chapter 2 âThe Importance of Price Noiseâ we should remember that operating in a shorter time period emphasises price noise, and taking a longer view emphasises the trend. Pairs trading assumes that differences between the two stocks will be corrected, therefore we are dealing with noise. Using a shorter time horizon will benefit us.
Good thing I got it out earlier. Internet down, no idea when I get it back. Not much fun tapping iPhone
i post alot in here on my adriod nexus phone... i try to voice to text it as much as i can.. but its tough..