Pairs Trading

[Mr. Charts]

OK, Grey1, thanks for taking the time to answer.
I was just looking for a ball park figure to compare with my own pairs trading.
It would have been interesting for people to have a very approximate idea of a range of return if they followed the approaches you advocate.

Let me re-phrase the question ;-)))

Would a reasonable rate of return for someone intra-day trading three divergence pairs of Nasdaq stocks per week be:

a) 50%-100% per annum
b)100%-150% p.a.
c) 150%-200% p.a.
d) 200% + + p.a.

opening long and short legs being of equal $ value, of course.
Do you leg out and allow the remaining position to run?

Again, your time, should you choose to answer these questions, would be much appreciated.
Please do not feel any pressure to answer things you don't wish to.

I do not intend to reveal my personal returns and I would never expect you to either. It's just that your view would be interesting ;-)

 

[Grey1]

MR Chart,

I Donot pair trade all the time as some days I might only get one suitable signal .. However pair trading is part of my arsenal of techniques I know which is programmed in my scanner. I also do a lot of directional trading..

The question of how much a pair trader makes is like asking how much of one's winning is due to going long a second pullback or similar strategies..

How ever if you have a figure in you head using your own pair trading technique then I appreciate if you let this mortal know

Regards

Grey 1 is risk frick and does not expose his capital to excess risk .. hence a pair trader

 

[Mr. Charts]

I see.........

"How ever if you have a figure in you head using your own pair trading technique"

It's not in my head, it's in my spreadsheet.

I learnt a long time ago that there is no point in putting one's own figures on t2w, they only stimulate hostility ;-)

 

[Trader333]

I cannot answer for others who are pair trading but I can give the results in points of four pair trades from Monday to the end of trading at 6.00pm tonight.

Monday
Two trades 60 points and 78 points total = 138 points

Tuesday
One trade 55 points total = 55 points

Wednesday
One trade at close 78 points Total = 78 points

All 3 days profit = 271 points

As Grey1 has said you dont always get a pairs signal but I have found that on most days you do and the best thing is the hugely reduced risk when entering the trade.



Paul

 

[Mr. Charts]

Thanks for that, Paul.
We're in the same ball park ;-)
Good trading and a very Happy New Year to you
Richard

 

[Grey1]

MR CHART

Quote " was just looking for a ball park figure to compare with my own pairs trading. "]

How do you choose your pair trades if I may ask ?

regards

 

[Grey1]

Paul,

Excellent stuff..

PAUL has been emailing me with his daily success of pair trading strategy which has put a lot of smile on my face.. I think sooner or later our community will grasp the idea of running a business as a trader which is more to it than clicking buy or sell buttons..

Any blind man can trade but Only those who understand the risk adjusted returns will survive the market.

All the best to you all.. I hope the new year brings loads of joy and happiness and tons of $$$$$$$$$.. and thank you guys for all your PM's

Regards

 

[Mr. Charts]

"How do you choose your pair trades if I may ask ?"

That, as you know, Grey1, would take a long time to answer and is multi-factorial.
However, on ranging days, there are certain time windows when
I look for long candidates with high RS and short ones with low RS and both must be trending. I find divergence pairs trading suits my trading personality much better than other ways and is much easier and more profitable, as well as being intuitively more logical. Only a trader would really understand the final three words of the last sentence ;-)
I find the pairs using the same methods I do for directional candidates plus the use of a scanner.
Exit methodologies on each leg are based on the same criteria as I teach in my seminars plus Elliott plus time of day factors.
I rarely close both legs at the same time since one is almost always still trending in the desired direction.
Like most of my trading, the above brief description of my own pairs trading is based on pure experience of what actually works.
Personally I find other techniques overly complex and not based sufficiently on price action itself or on market sentiment. The latter being the two prime movers which are easily readable.
But, of course, that is a matter of individual taste - there are very many successful ways of making money from the markets.

 

[Grey1]

Mr chart,

Quote” I look for long candidates with high RS and short ones with low RS and both must be trending. I find divergence pairs trading suits my trading personality much better than other ways and is much easier and more profitable, as well as being intuitively more logical “.




Traditionally divergent pair trading heavily relies upon correlation analysis and sole Weak or strong RS does not qualify a pair trade for a profitable opportunity .. If this was the case one would pick two stocks every day , one which has had a bad day ( short ) and another with a good day ( long ) and wohoo we would have a opportunity not OBSERVED by others.. There are other means of pair trading which does not need correlation analysis and are implement able intra_day which currently 4 good traders from this site are test driving it all in real time and is based on VWAP(mean reversion) analysis.. (The good news is that it does not rely on PAST PEFORMANCE ETHIER NOT LIKE CORRELATION ANALYSIS.. ).


You have also mentioned that divergent pair trading is more profitable than any other ways.. DO NOT BELIVE WHAT YOU READ FROM THESE INTERNET SITES..

I am not having a go , just thought for a Coach , you should know far better.


regards

I enclose an interesting read for our younger traders

 

[Mr. Charts]

Well, Grey1, you responded just as I anticipated.......

I know exactly where you are coming from.
You have no idea how I actually choose my pairs and when and how.
You asked me what I do and I answered IN GOOD FAITH, yet your response was,

" not having a go ,(really? - that technique doesn't work.....) just thought for a Coach , you should know far better",

was exactly the way I thought you would respond.

So much for informed debate, then...........

I'm afraid these boards have become debased and when even the better posters sink to the lowest common denominator, I find that very sad and a shame for those who read these threads to learn.

Your comment was rude and offensive, not to mention clearly motivated.

I will not return your tone and behaviour in kind, but you demean yourself, Grey1.

Humility, mutual respect and tolerance are in short supply on t2w

 

[tradesmart]

Well said Mr Charts and you have my vote as a very good and helpful user of these boards.....!

Perhaps some who are associated with 'moderation' that tends to lapse into 'confrontation' should take note.....

that said, A VERY HAPPY AND PROSPEROUS NEW YEAR TO ONE AND ALL..... :cheesy:

 

[Trader333]

Richard,

If you believed that Grey1 was going to respond exactly as you had anticipated then this says to me that your original question was structured to cause this response to start with and hence your final reply to that.

In fact you have even gone a step futher by directly insulting him by saying:

I will not return your tone and behaviour in kind, but you demean yourself, Grey1

Grey1 has not personally insulted you as he has only commented on what you may or may not have said or done, nothing at you as a person.

So if it was not your orignal intention to provoke this response then why even ask the original question to start with if you knew this was going to be the result ? To me that is just inflaming a situation that never needed to have been ever started.

I have to say I am very surprised



Paul

 

[Rognvald]

Grey 1and others following this methodology

What factors do you look at to judge the proportionate sizes of your respective longs and shorts please? I ask this as it seems fairly crucial and seems to involve a correlated directional judgement?

Ron

 

[Level2]

Trader333

For what it's worth, me too.

L2

 

[Mr. Charts]

Happy New Year, Paul,
I was responding to HIS question.
No, I started by asking him some questions to which he chose not to answer. That's fine, I have no problem whatsoever with that. I view that as being his inalienable right.
I asked my questions politely and would have appreciated an open response.
Grey then asked ME a question.
My judgement of his possible response to my reply was just the sort of scarcely veiled criticism he came out with.
I chose to reply for two reasons, despite his decision not to answer mine:

a) I thought my contribution would be of use to others to consider.
b) I wanted to give Grey1 the benefit of the doubt.

I expressed what works for me and added, "But, of course, that is a matter of individual taste - there are very many successful ways of making money from the markets."

In my judgement my entire post was a useful contribution.

His response, "I am not having a go , just thought for a Coach , you should know far better" was based on what, actually?

He has no idea how I developed my techniques and strategies but implies that -

"You have also mentioned that divergent pair trading is more profitable than any other ways.. DO NOT BELIVE WHAT YOU READ FROM THESE INTERNET SITES.."

Did I say that? No.

So, yes I view his comment, " you should know far better" as being confrontational and hostile.

But that is of no consequence to me - sticks and stones etc
I'm disappointed for the sake of those people who want to see a healthy debate on pairs trading with different contributors.
So yes, I do think as Grey1 has put up some excellent posts on the subject he has demeaned himself by that unnecessary and gratuitous comment.
However, if the moderators admonish me for my response, then I will accept their view, though that doesn't alter my opinion on this matter.
Should he have the grace to withdraw that remark, then I will respond.
Best wishes,
Richard

 

[riddle]

Grey1:

The link you posted above (http://www.trade2win.co.uk/boards/attachment.php?s=&postid=68402) doesn't open for me. Can you check that you did it right? It might be just me of course. I probably don't have powerpoint loaded on this box.

Steve

 

[ChartMan]

We all know there are many ways to skin a cat. We all know there is no Holy Grail. Somewhere inbetween, you will find everyone's trading ideas that works for them...........

 

[Mr. Charts]

I agree completely, Chartman, which is why I said,
" expressed what works for me and added, But, of course, that is a matter of individual taste - there are very many successful ways of making money from the markets."
There are plenty of rude arrogant people on these boards and I wouldn't even bother replying to them.
Grey1, however, I have always viewed as a valued contributor and one whose work I respect so I have demonstrated respect, even when I have disagreed with him, as on the "Volume" thread.
That makes his response even more unpleasant.
As far as I am concerned let's get back to serious debate to all our mutual benefit and try and permanently extend the season of goodwill.

 

[briz01]

Hi Grey1, I too am having trouble viewing your file.
What software do I require inorder to view it ?.

Brian

 

[Sharky]

Grey1 I think you'll need to reupload that file as the sourcecode is pointing to other webpages using relative urls eg directory/index.html rather than the absolute url eg.. http://www..../directory/index.html- and so is unable to find them. If you need any assistance don't hesitate to email me.

Happy New Year All!

Paul.