Spread/Pairs charting package

Discussion in 'Technical Analysis' started by Fib Gridsman, Apr 12, 2009.

  1. Wondering if anyone can steer me into the right direction. I'm a current Esignal user. It does the trick for the most part but I need a charting package that can chart spreads more accurately.

    Esignal uses only the open and close of the underlying symbols to calculate the spread and populate a chart. Without getting too involved in the technical elements of charting a spread price, what this means is that while you get an idea of where a spread traded, the candles plotted are very inaccurate. This applies to 1-min all the way to daily/weekly, but longer the time frame, the less accurate the chart. This is because esignal use the opening price of each underlying to calculate the spread and open the candle (at the selected interval) and the closing price of each underlying calculation to close the candle thus ignoring all the prices the spread traded in between the open and the close. For other technical reasons, such as a late stock opening by the NYSE specialist, this can mean that what should be a green/up candle, is actually plotted as a red/down candle and visa versa. Obviously this is very frustrating for backtesting and many other reasons.

    There are several ways to plot a spread accurately. I think CQG is probably the best. They take the 1 min open and close data of each underlying symbol and extrapolate that do determine how each time frame is plotted. The most accurate would obviously be tick by tick calculation, but there are computing/bandwidth issues to contend with. The next best would probably be a 1-min vwap or 1-min pivot (HLC/3) of each underlying symbol and use that to plot the spread.

    So far I have used, esignal, dtn prophet x, and ensign.

    Esignal: Great fast data, pulls and calculates the historical data quickly, but inaccurately.

    Prophet X: Great for commodities spreads, but the "synthetic spreads" use some funny math to simulate the wicks of the candles and equity pairs/spreads end up being inaccurate.

    Ensign: Awesome and versatile package. "synthetic spreads" are calculated tick by tick and are 100% accurate but there is no way to get this on a historical basis. Spread overlays are not helpful because they plot the first symbol of the underlying in the y-axis and not the spread price.

    I think that linnsoft does a good job as well, but their GUI is a little frustrating (same goes for ensign). Data vendors and charges are also a consideration so I am less inclined to use CQG (because I will have to pay professional data fees).

    If any spread traders out there would like to weigh in it would be greatly appreciated.
  2. unapologetic bump.
  3. bone

    bone ET Sponsor

    I use CQG. Good down to two-minute bars. I also use dynamic data links from the TT front-end into an excel spreadsheet for true real-time pricing data when I can't glance over to my CQG monitor bank. Having twelve monitors can be a pain when the market's moving.

    Before I begin each day, I have a game plan and some price levels that I highlight on the spreadsheet. I don't usually initiate trades from the spreadsheet via the TT autotrader or the TT autospreader because I like to use some tradecraft when I'm legging into and out of spreads.

    Properly constructed spread trades lend themselves very well to technical and statistical analysis - much more so than the flat price directional marketplace. So, if you're trading spreads intraday, get the best charting package you can afford. If you're swing trading, then it's not really mandatory. For me, my strategy is to trade big size spreads on a high-frequency intraday basis, and carry a much smaller core position overnight since spread trades usually trend regardless of the flat price market. I clear Rosenthal-Collins Group for my futures, and in 2009 my daily statements have been running well over 50 pages each day.
  4. Thanks bone,

    I trade equity spreads and I use a spreadsheet because esignal can be pretty unreliable (re-plotting spread candles intraday, etc.). I find that I pretty much default to my spread number in the spreadsheet and only really look at the chart for a longer term perspective. For a high frequency spreadtrader (mergers come to mind) you need something 100% accurate. The more I learn about CQG the more I think it justifies the price, but I'm really trying to keep my costs down.

    Another alternative is to import csv files of tick data into Ensign for a tick-by-tick accurate chart, but this seems like way too much work if you are tracking multiple spreads.
  5. Depending on your software development skills, you may be able to use something like esper to create the spreads (http://esper.codehaus.org/).

    By doing that, you could create the spreads using the bid or ask for each leg.

    I trade spreads too & have found that the charting issue is a huge pain.

    Its hard to justify a the full CQG/TT cost unless you're doing heavy volume.

  6. Hey Eric,

    I think that is a little bit beyond my skill set, but I will look into it. Like a lot of software in the trading world, Esignal, Prophet X, Ensign all have good things about them, but just seem to be a little lacking. I think the ultimate situation (price-wise) would be if Ensign just improved their historical spreads. As it is, if you want a historical spread chart you have to look at an "overlay" chart that plots the first underlying instrument of your spread in the y-axis instead of the spread price. For instance, if you are lookign at FDX-UPS, you would only see the price of FDX. You can see the spread price if you double-click on the y-axis, but you can't rescale the chart. Ordinarily this isn't a big deal, unless you are looking at a tight spread, in which case, it just looks like a flat line. On the other hand, the Ensign "synthetic spreads" are freakin flawless -- perfect tick-by-tick accuracy. The drawback of course is that if there is an interruption in the data, then you have a gap in the chart, and there is no historical data.

    If Ensign improved the functionality of their spread charts, I would saddle up with DTN data and be one happy customer.

    With spread trading becoming more and more popular, you would think that more software vendors would be making these improvements.
  7. Amibroker is compatible with eSignal data, and is very flexible: you create your spreads and it charts them using the same time frame you get your data. Historical charting is possible as long as you have downloaded past data.
  8. thinkorswim's charting is decent down to the 2min time frame
  9. Sashe


    How do you plot pairs in TOS? I only found the subtraction option (like KO-PEP) and not the ratio (KO/PEP) which I mostly use
  10. You're right. The subtraction option is what I use.
    #10     Jul 16, 2009