Johnny, on the ETP/PAA pair how to you evaluate a short/long that pays a hefty dividend vs the other please? Thanks
Not sure if I understand your question properly, however both pay around a 9% dividend, but its not something I look into too much.
Johnny - excellent thread, great trading. All the best for 2009. I have questions regarding trade management. You have mentioned that you do not apply your own stoploss on the spread, just wait for the program's exit signal (which I presume would have a built in stoploss). Also I understand that most trades initially lose, until they turn around to spread convergence. - What have you seen (typically and worst case) as drawdown for losing and winning trades (in % or standard deviations) ? - Any "mental" stoploss, or do you solely rely on program exits? - Are you concerned at all about sudden expansion of spreads? - Do you feel these trades need a constant "babysitting" for exit alerts? (... I think you mentioned a preference not to trade the whole day).
Thankyou, yes I stick to the software exit signals strictly which trigger when the pair comes back to the mean, I don't believe there is a stop loss although some trades end in a loss even when coming back to the mean. My win rate is about 72% and avg loss is about 1 and half times the avg win. I don't use any stoploss at all, generally losing trades are one's that take about 20-30 days to trigger an exit, no matter what your style of trading every now and then your going to find yourself in a ugly trade, ive had my fair share, thats part of the game, I just treat it like a business, where you have ongoing costs(losing trades) and every now and then the business requires a capital injection(large losing trade), its a game of numbers, not trade by trade results rather your performance after 20, 50 or 100 trades. I only open the software and my brokerage platform 1 hour per day at market close, less is more when it comes to trading as too much screen time can affect your health, especially mentally it takes a toll. Keep it simple are the truest words ever spoken.
thanks for the response. You use MOC orders? Doesn't it happen that say the price at which you get filled on the MOC print is often not wha tyou want as you have to enter these suckers before 3:40 est?
I hope no-one was long Satyam (SAY) in any of their pairs trades An interesting pair would have been long Madoff short Satyam Basically a breakeven wash.
Yes I scan for signals between 3:30-3:40pm, and send MOC orders, sometimes if I don't get MOC orders entered in time il send mkt orders just before the close, yes the closing print will be different from the 3:40 price, usually not by much, sometimes a better price, sometimes not, equals out over time, but I always have both sides executed at exactly the same time which is most important.
jonny, I have been using pair trade finder for a few months now and was wondering if you use any filter once a buy signal is reached , since I seem to get a lot of them. Any help and advice would be great
Yes I filter through multiple entry signals everyday and am very picky in the one's that I choose, basically I have my pairs watchlist split into different industries, then only look at pairs above 90% correlation, I like to see an correlation in an uptrend, but mostly I'm eyeballing the ratio chart, I want it to be a wide trading range, I don't take entry signals on pairs that have strongly trending ratio charts, I also look at a volatility, spread & fundamentals for anything at extreme readings, but mostly looking at the ratio chart.