I think to be successful you need to be much more sophisticated than just looking at some correlations. this might be of your interest: Pairs Trading: Quantitative Methods and Analysis Ganapathy Vidyamurthy ISBN: 0-471-46067-2 Hardcover 210 pages August 2004
Does anybody know of software that lets us do this strategy? Buy between the spread of .25. - Example, buy at .22 instead of .25. Or do we need to be physically on the CME floor? We can do this all day long with ECN's and stocks, but I haven't seen software that lets us do it for Emini. My strategy runner software doesn't allow it. I'm wondering if Strategy runner is doing this(buying between the bid and ask and selling for a profit). Is there a way to trade directly? Instead of going through strategy runner(like we do with ECN's and stocks), except with emini. Route the order directly to CME?
firstchoice: you should really read up on the contract specs at www.cme.com. This is at least your 2nd post on buying between the minimum tick size for ES. FYI, the smallest price increment is .25 for ES, and it's rare that the spread is larger than one tick. Arbing with SP floor contract is what was described above. Hard to do without being on the floor!
I think you guys just aren't thinking creatively enough about pairs. Like, f'rincestance, Tampax and aspirin.
OMG, first we have a guy on one of the FX forums who thinks he can go long and short the same currency at the same time and scalp it for profits. And now on this thread a guy that wants to buy the ES at .22. You know what, it's my fault, I force myself to read this shit. It's just so hard to not slow down and stare at this train wreck.
Don't forget, you were new at one time also. You shouldn't make fun of people that are just learning. It isn't nice.
MSchey's comment's above are truly valid, it takes time to learn any profession, and yes, even losing some money can help in it's own bizarre way (we do our best to shorten the learning curve with our traders (pairs and otherwise), but it still takes time. I've responded to the "chop prop double commish" silliness several times, and since we teach a form of "crutch" pairs trading, we tell the traders that if they can put on a short postion (at the right time of course, based on tape reading ,etc.), and if their timing is good, simply close out the profit on it vs. completing the pair...but if the short goes against them, then you can choose, either take a small loss, or hedge off with a pair (at a pre-determinged optimal price, of course), by "leaning" on the long side (offer that you can buy). Don