There would be an immdeiate deluge of posts saying you are a fucking idiot for asking that question here instead of going to their website, you are correct about that.
Why don't you read the thread to understand, what's wrong with you? You really are clueless. The top of the right shoulder is 1146. We've gone as low as 1127 off of that. You can't see how to make profit from a 20 point move? I'm not bailing on anything, I'm trading it. I don't just buy things and hold them like you do. I'm a successful trader because even if price rallies to new highs, I still have made money. If prices crashes, guess what, I've still made money, in fact I'll make a ton if that happens.
ICE-Europe Gas-Oil Crack Spread, Exchange-Supported These are executed internally with the exchange order matching engine at the correct 4:3 ratio. So, a one-lot in the spread order book is in actuality a four lot in the Gas-Oil future.
Nice charts, bone. I don't have eSignal but I have been able to duplicate with iqfeed and R (I'm a programmer at heart). It seems to me that when trading spreads you still must often trade directionally. How do you know which direction to trade? (Particularly in the Nikkei vs. Topix example.)
Spreads were a great mean reversion trade (convergence) from the late 90's until about 2006. It is a directional divergence trade in a big way now. I have a mechanical trading model for the entry points, and I provide it both in chart technical study format and the custom programmed scanner format to clients. Most usually use both scanner and charts simultaneously, since we have so many different spread combinations in every market space which we have to monitor. So, pure mechanical entry. The trade position exits are rules-based by design. For all practical intents and purposes, I suppose that we are 'gray box' traders.
I gotcha. I tend to understand the mean reversion stuff, I think. At the risk of linking a real name to my ET handle, here's a blog entry I've written about it: http://jdunn.posterous.com/pairs-trading-and-r-part-i I guess that due to the anecdotal "statarb has dried up" mentality as of late, I'd assumed that you were trading spreads directionally, or doing something other than classical mean reversion trading. For instance, eyeballing your "ICE-Europe Gas-Oil Crack Spread" chart, I see a definite trend there, and without further evidence that the spread should be lower, I'd have a hard time justifying a sell. Apologies in advance for being a clueless newb, if I'm being one.
Honestly, it is more profitable to trade them directionally. Less execution slippage, and bigger moves that tend to be sustained moves. Longer holding periods, and the exchange SPAN margin credits makes it cheap to capitalize and lever.
Yep, but like with all other RV trades the big bugbear is a risk of a balance sheet/margin sh1tshow. Then it's Meriwether time (if you're not careful)!