Barjon's Money Machine

Human nature: If this arbing system could work, done through a spread betting firm, why has it never been done in a journal?

Surely someone would have had their 12 incher(flacid) out by now? Doesn't make sense.
 
Human nature: If this arbing system could work, done through a spread betting firm, why has it never been done in a journal?

Surely someone would have had their 12 incher(flacid) out by now? Doesn't make sense.

Depends where they are on the evolutionary scale i guess :LOL:
 

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Human nature: If this arbing system could work, done through a spread betting firm, why has it never been done in a journal?

Surely someone would have had their 12 incher(flacid) out by now? Doesn't make sense.

because it's not a case of it working or not working. its a case of it is what it is and it depends on how you enter and exit trades where you take profit and where you take losers. The relationship between the 2 components is what it is, how you play it is up to you. When do you enter, how much deviation from mean, how do measure that deviation? If it goes against you do you average in, if so how many times? When do you take a loss? All of this needs to be decided and back tested/ forward tested. Then you have to consider someone has to try this at a bucketshop and make it work overcoming the spread, then someone would have to go to all that bother and then post it into a journal.
 
because it's not a case of it working or not working. its a case of it is what it is and it depends on how you enter and exit trades where you take profit and where you take losers. The relationship between the 2 components is what it is, how you play it is up to you. When do you enter, how much deviation from mean, how do measure that deviation? If it goes against you do you average in, if so how many times? When do you take a loss? All of this needs to be decided and back tested/ forward tested. Then you have to consider someone has to try this at a bucketshop and make it work overcoming the spread, then someone would have to go to all that bother and then post it into a journal.


Right:rolleyes::LOL: Go on then, twist my arm, let's see how it goes...
 
D70 - aye "It's all been done and is being done". s'why I said it's not new thinking in the original note. Don't bother with charts just use the numbers.

Kimo - there's probably hundreds doing it but keeping it quiet :LOL: (now we are getting into lulz land). btw doing this mainly intraday (albeit don't mind carrying over too much) not eod. The eod position is my "long term" chart if you like.

choc - i use sb 'cos they are virtually open all hours, but mainly because it's not my main stuff so I use my play accounts. I don't know what their out of hours algorithm is to set their prices, but I guess associated with ftse futures and US futures.

Anyway it's made for an interesting day and maybe given people a few things to think about. Thank you all for your attention :)
 
Every stop arguing and just get legging in to index spreads and build a nice portfolio. You know you want to.
 
suprised that this thread has got such a strong reaction, as if it's something new!
One of my first ever attempts at trading was rather similar to this idea (spreading between indicies looking for a reversion to the mean)
It made me rather good money every day (typically around 30 pips per day at £20 per pip or so) for months and months on end.
I then got into a bad one where the DAX was as strong a friggin' race horse whilst my FTSE hedge was as weak as a kitten and I took a nice big hit when I couldn't stand the pain any longer.
I've moved on since then, but it is something I still think about and think I may oneday revisit the concept, hopefully with improved risk management and some other elements I hope I have learnt over the years since then.
Good luck
 
Barjon,

I too have done stat arb for a certain amount of time and one of the biggest constraints I found was size. You need to put on serious size to make anything serious back.

And as we all know Amaranth paid the price of "too much size".......
 
Barjon,

I too have done stat arb for a certain amount of time and one of the biggest constraints I found was size. You need to put on serious size to make anything serious back.

And as we all know Amaranth paid the price of "too much size".......

yeah maybe so, you rarely get in more than one trade a day. As I said before, it's only in my SB play accounts and I've not been beyond £10/£5 too often. Should the main equity stuff ever go belly up I might move it over, though that's unlikely.

The main reason for that was touched on by toastie. I do like to know where I am riskwise and I do like to be able to control the risk better than I can with this.
 
oh I should record that I've closed today's when it hit my mental 30 stop, finished up -28. Having said in the note that there were only 10 occasions in the year when it was all one way traffic I managed to find another one today which I had opened in anticipation of the thread. Such is life :LOL:
 
toastie

Believe me, I'd set a stoploss if I could. Trouble is that it is not a "directional" trade but a "relationship" one. The market might be going up or down but that has nothing to do with the relationship so you can't set stops (or limits).

A stop loss is quite achievable, Jon. In fact, plenty of platforms have this.

The fact your broker doesn't support it & you haven't got someone to code it up via their API is a separate issue.
 
Blimey, toastie, you're a hard taskmaster :)

Based on the fact that it hasn't happened in your analysis period, right?. Well it hasn't happened for 40 years and that's good enough for me.

40 years ago, there wasn't an Olympics in London and a bunch of Muslim fanatics trying to blow the place up. You think FTSE couldn't gap down dramatically without bringing down the DOW? You think the UK economy is that significant to the US?

Also - you are looking at numbers and not value. If you were trading futures, you would have to take into account their values.

The reason this is important is that even though you are not trading futures, you are expecting your SB to pay out on a dollar denominated trade, even if the sh!t hits the fan with the currency.

it is clear that something bad happened almost 3 years ago that cause you a lot of grief.. It something I'd prefer not to talk about :eek: I had misjudged the starting extreme and added at the next extreme level and the next like a rank beginner and suffered the inevitable consequences - a near 30% dent in my account. Now you know why I was keeping it dark :LOL:

ok

unclosed loophole in the way SBs take bets.. I don't thinks it's a loophole. Certainly SB make their own prices and after closing their ftse moves with the futures and dow. There is often a sharp (untradeable unless you'e already positioned) move on ftse open as their ftse moves to reflect real ftse. It'd be interesting if you see the same sort of differences arising in the futures.

Yup - it's called a GAP, I would presume Futures & SB handle it a little differently but same concept.

The loophole I discuss is in the fact you are placing a trade with currency risk across the pairs but your SB apparently is taking on the currency risk, unhedged, on your behalf.

Thus far, I think only 2 members have actually got this point.

Anyway - good luck with it.
 
A stop loss is quite achievable, Jon. In fact, plenty of platforms have this.

The fact your broker doesn't support it & you haven't got someone to code it up via their API is a separate issue.

Barjon,
You know IGIndex quotes ftse-wall st difference?
Not quite the right mix of the two but a better trade for risk protection.
And like DT says, quite a few sophisticated brokers will allow you to set up your ftse dow "spread" into a tradeable price.
 
The loophole I discuss is in the fact you are placing a trade with currency risk across the pairs but your SB apparently is taking on the currency risk, unhedged, on your behalf.

Even in futures you could adjust your position sizes relative to the currency cross and reduce your FX exposure e.g. (assuming Dow futures work $12.50 1/4 ticks a point and ftse is £10 1/4 tick :confused:)

£40 / 2.26 (ratio) = 17.69 x fx rate e.g 1.565 = $27.699 per dow move

so 1:1 would be a roundabout for the current FX rate. Unless there's a massive currency event you're okay


Also

Don't really know anything about the methods used to negate the small sample bias, like, but this is basically what I was talking about re globalisation and shared risks analysed from the mathematical/statistical perspective.
 
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