Pairs Trading UK & US Stocks Journal

[JGH03]

Yes it will trigger an exit signal when the pair comes back to its mean, it doesn't use a stop loss, because a rolling mean is used instead of a static mean it will simply exit once the pair comes back, profit or loss.

About 70% of my trades are profitable, not sure what the ratio would be if I didn't apply filters, it may be the same but the trades I take would have a lower risk profile.

Thanks. I had hoped for a higher success ratio, but perhaps that's unrealistic !
Do you always wait for PTF to signal an exit or do you apply your own criteria for terminating a losing trade ?

 

[stocktrader77]

Thanks. I had hoped for a higher success ratio, but perhaps that's unrealistic !
Do you always wait for PTF to signal an exit or do you apply your own criteria for terminating a losing trade ?

Yes I always wait for a exit signal from PTF

 

[JGH03]

Thanks Stocktrader

 

[stocktrader77]

Exit trade for profit

Sold SPG - 28.70

Covered TCO - 13.87

Opened new trade in Oil & Gas Drilling

Long Entry AREX - 4.72

Short Entry NE - 22.56

 

[stocktrader77]

Exited these trades for a profit

Sold MWV - 9.07

Covered GEF - 27.89
-------------------------------
Sold ACE - 33.72

Covered CB - 35.66
-------------------------------

No new trades.

 

[stocktrader77]

Sold WLL - 23.93

Covered HP - 23.44

 

[stocktrader77]

Sold ANV - 4.22

Covered GRS - 7.14

 

[stocktrader77]

Sold SFY - 6.46

Covered ROSE - 4.31

This recent rally induced initially from the citibank memo citing profits has been on weak volume across the board on all equity markets, so I think its more short covering as oppose to fresh buying, from a technicians point of view this a mere bear market rally and further testing of new lows is likely, however this rally may be good for a 20% rise and last several weeks, look out for a vicious reversal on strong volume.

 

[stocktrader77]

Exited 2 trades

Sold EQR - 21.39

Covered ESS - 66.54

-----------------------------
Sold AREX - 5.83

Covered NE - 25.11

--------------------------------
Entered new trade in US Medical Equipment & Appliances industry

Long VAR - 30.73

Short SMTS - 15.31

Very nice ratio chart on this pair. Spreads have tightened once again as market became quite dislocated over the last several weeks.

 

[stocktrader77]

Market has stabilized and spreads have converged, whenever there is a selling climax in the averages, it proves to be a good time to place spreads, something il take more advantage of next time it comes around.

Entered trade in US Shipping Industry,

Long TGP - 17.50

Short TOO - 13.17

 

[stocktrader77]

New trade in Agricultural chemicals

Long AGU - 39.90

Short POT - 89.30

 

[stocktrader77]

Closed trade in US shipping industry for a profit

Sold TGP - 16.79

Covered TOO - 11.43

 

[mikeeg]

Stocktrader,

Been reading your journal with interest, keep up the good work! Having had the opportunity to demo trade PTF over the last week or so I have a few questions and wondered if you (or anyone else who has PTF for that matter) can help.

1. The +/- column....I know this is the spread...but what does it really represent? PTF seems to trigger signals when +/- gets above 2.00 (Is this akin to standard deviation?)

2. Do you consider trades which are already "in trade" if spread is good enough? (e.g. signal triggered one day, but then ratio continues to get even worse, would you reconsider option to take trade or layer in?)

3. I've put on a few demo trades so far, but realise that earnings can really throw things out the window (e.g. I put a trade on, then literally the next day the company gave a surprise trading update). I guess this is why position sizing in relation to overall capital still remains important.

4. I'm demoing via pricing on spreadbetting and I'm finding that unless the spreads are tight, you dont stand a chance at being successful. I'm assuming that DMA is the way forward (albeit having to pay commissions and potentially CGT).

Cheers,
Mikey

ps. All demo trades so far have been on NYSE, cant find anything decent so far on LSE.

 

[JGH03]

Mikey

I downloaded PTF earlier this week and I'm currently getting to grips with it, so my comments don't have huge expertise behind them but to pick up on some of your questions ...

The +/- column is Standard Deviation but with a sign to indicate whether the current ratio is above or below the moving average.

I'm surprised that spreads are a problem. Spreads for the FTSE100 companies I look at are very small in relation to the movement required to close the "gap" between the companies. Can you give some examples where this is a problem ?

I've noticed that whether or not you get a signal depends in part on which item is on the left and which is on the right. My sense is that the instrument with the higher price should be on the left. (It appears to me that ratios and SDs are worked out to 2 decimal places; dividing the higher number (on the left) by the lower number (on the right) gives more significant digits to work with. eg: if RDSB is at 1562 and BP is at 461, then RDSB / BP = 3.39, but BP / RDSB = 0.30; a 15p rise in BP's share price gives ratios of 3.28 vs 0.30 respectively - a significant change in one case vs no change in the other case.)

By the way, on my system I noticed that data is missing for RDSB on 31 March and 1 April - haven't yet found out why. However, if you are experiencing the same problem with other companies this might explain why you are not getting many signals.

John

 

[mikeeg]

John,

Appreciate the reply. Well my demo trades have all been US ones so far and any UK ones I considered were AIM listed stocks, so naturally the spread is dire for these (haven't had any signals for FTSE100 stocks yet, although haven't found the time or patience yet to upload every last stock in each UK sector).

I have an excel spreadsheet to keep track of larger FTSE100 ones and extract the data myself from Yahoo. I say this because the other day I went onto RDSB (both a&b) and few days data was missing from historical download so that may explain that.

Very interesting point about which code goes on the left. Never even occured to me, although I think you have a point. Im guessing there is probably not a quick way to sort/rearrange via the console/watchlist?!

Thanks.

 

[stocktrader77]

Sold VAR - 30.31

Covered SMTS - 14.26

---------------------------------
Sold AGU - 38.28

Covered POT - 83.48

Il chime in guys about the latest topic brought up after NY close, im busy trading atm.

 

[stocktrader77]

New trade opened in restuarant industry

Long CAKE - 13.85

Short RRGB - 23.73

 

[stocktrader77]

New trade in oil & gas sector

Long GTE - 2.43

Short STR - 31.49

 

[stocktrader77]

Exited pair trade for good profits

Sold CAKE - 13.38

Covered RRGB - 20.47

Entered new trade in energy sector

Long ETP - 37.55

Short PAA - 40.01

 

[stocktrader77]

Closed trade last week;

Sold ACGL - 56.06

Covered ACE - 43.99

New trade in Investment Brokerage Industry

Long SEIC - 13.93

Short OXPS - 14.07