Pairs/Basket trading software needed!

Discussion in 'Trading Software' started by royce09, Jun 3, 2002.

  1. royce09

    royce09

    To all, I would greatly appreciate recommendations for an automated pair and/or basket trading software solution.
    (from the most expensive to the least expensive)
     
  2. nkhoi

    nkhoi Moderator

    tradetrek.com, free trial but seem like nobody use it except me???
     
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  3. qazmax

    qazmax

    PreferredTrade and Interactive Brokers both offer basket trading now.
     
  4. hsanson

    hsanson

    nkhoi: how has been your experience using Tradetrek's pairs strategy. I did a quick backtest spanning over a month on their site and it seems that it lost consecutively.

    I have backtested daytrading pairs strategies using tradestation and have obtained good results so far, but I think there will be problems when executing them in realtime based on intraday 5 minutes bars. All my research is based on the formula explained by Stephane Revere that appeared in an article in Stocks & Commodities. My pairs analysis is based on simple standard deviation calculation of the pair's difference. When the standard deviation surpasses the 1.5 standard deviation I bet that the difference will close.

    There is another stock pairs article that appeared on the may 2002 issue of Stock and Commodities, so far I have not been able to grab that copy of the magazine and is right now in the hands of a friend of mine.

    Don Bright is very experienced with pair strategies, maybe he can share some of his knowledge and experience about that particular strategy.
     
  5. nkhoi

    nkhoi Moderator

    sorry, only thing I trade is e-mini, I just want to point out that tradetrek offer pair trading picks and you can always e-mail them with any specific question.
     
  6. royce09

    royce09

    I'm sorry I should have been more specific. I am looking for recommendations for a stand alone automated pairs trading software solution. I too, (like hsanson) have completed several months of backtesting via the neural shell day trader professional. (I would highly recommend to any one who dislikes programming, even at the very low level of tradestation; you can still program if warranted) And being a former merger trader, I have had lots of time to ponder, conjecture and ultimately verify my hunches and clearly, there is a bias toward making money in the short term, mean reversion, pairs framework.

    Now I would like to leverage the research into a consistent, mechanical framework.

    Further, since my original post I have found several sources for automated pairs trading systems. I will post them here as I have previously asked you to post you suggestions and they are as follows:

    http://www.systematicmethods.com/
    http://www.realtimetools.com/products.htm#pairs
    http://www.happytrader.com/pairs.htm

    Don't ask for on opinion on the above listed since I have not contacted any yet. (But soon will, as I hope to be autotrading within the next 2 weeks) And if anyone has used any of the above I would like to hear your opinions on the products.

    Thanks for your responses and time,

    Royce Vinson III
     
  7. I'm doing some pair trading now based on the same article (and Reverre's book). I've built a pretty in depth excel spreadsheet that I feed live data using qlink. It produces charts on 5, 15, 60 minute and daily time frames. I chart the ratio, the dollar spread and the standard deviation of the spread. I also use qcharts to chart the spreads and put bollinger bands on them using a 30 period avg and 2 st dev.

    It's working ok so far, but the biggest issues for me are controling the risk and handling spreads that are trending. The numbers that make a trade look attractive are subjective and there is no defined relationship between the stocks like with a merger spread. So you can expect the trades to go against you quite often. Statistically, the further it deviates from the mean, the higher the probability that it will come back. But at what point do you finally bail on a losing trade? You can try to take off all or part of one side to capture part of a move, but then you are making a directional bet on the market, which you don't have to do when you lock in the spread right away and just leave it. You can also only trade one of the stocks, leaning on a bid or offer in the other one. Of course if the trade goes against you and you lock in the spread, you're still in the same position. I've talked to traders that add every 50 cents that the trade goes against them up to three times. But then when it comes to the fourth time, you are down 2 bucks in the trade with 4 times your normal position size.

    Would like to hear comments from other pair traders on your exit strategies and risk management rules.

    Corey