ASX Stock Pairs Trade Journal

[el caballo]

Yes, I watch the market 16 hours a day.

I don't dispute the rally was caused by short-covering, but to say it has continued because of 'gullible buyers' is not the truth. If you watch the data 16 hours a day and the markets reaction, you cannot dispute there has been a genuine pick-up from where we were at near the bottom, stimulus enhanced or not, it is there for all to see.

I don't dispute the factors you talk of going forward, as I stated in my last post, I also don't dispute the good news may already be factored in (I am positioning for it myself), but we are talking about gullible buyers who came in because of short-covering, which is far too simplistic considering what we have seen over the past few months data wise.

Concur with MRC. Pairs, your software is probably quite sharp, but your broader analysis underpinning this rally is highly questionable. In any case, sorry to continue off-topic within this thread.

 

[Pairs Trader]

I won't offer my economic analysis here again as I don't want to get into a debate which could distract me from my trading and/or thinking.

Pair trading only.

p.s. el caballo, that's a pointless post, don't call my analysis questionable unless you can offer your own contradicting analysis backed up by facts.

 

[Realism]

Must agree with Pairs Trader here, this thread is clearly denoted "Pairs Trade Journal" for a reason.

Messrs MRC and el caballo, there are countless other threads/sites devoted to economic analyses that will be happy to accept & respond to your rationale .....

Pairs Trader: your efforts within this thread are appreciated by the majority, keep up the good work.

 

[MRC & Co]

Messrs MRC and el caballo, there are countless other threads/sites devoted to economic analyses that will be happy to accept & respond to your rationale .....

Pairs offered a reason for the rally, I disagreed.

I was always behind this thread, only offering a comment for those who may be reading his analysis on reasons for this rally. I think the data speaks for itself (if you don't believe it, look it up) and it was very well pre-empted by the market.

Realism, perhaps you can contribute to the forum yourself if you have anything constructive to add.

Back to the thread.

 

[el caballo]

Yes, back to the thread - apologies for temporarily de-focusing it.

 

[Realism]

Fair enough folks - I just wanted to give PT some moral support, I was worried he was being outnumbered.

Personally speaking I have differing views on the short-term future of the market, I think there are a few more shocks to come. But who really knows? And isn't that the beauty of the market, everyone's got a different opinion

I'm only 2 months into pair-trading, but have a few favourites already (WOR/WES, OSH/STO, ANN/AMC). Index trading has been good to me too: Wall St vs ASX 200, Wall St vs Hang Seng. But I've been caught out on a few trades: CBA/ASX is a prime example. ASX has missed out on the recent stampede in banking stocks, thus making me question the validity of trading pairs in different market sectors.

I also struggle with my exit strategy: unfortunately I'm unable to watch my trades 24 hours a day, and it seems next to impossible to place effective stops on trade pairs?

Would also like to start investigate overseas exchanges for potential pairs: anyone had any luck trading outside the Oz market?

 

[skc]

I also struggle with my exit strategy: unfortunately I'm unable to watch my trades 24 hours a day, and it seems next to impossible to place effective stops on trade pairs?

Would also like to start investigate overseas exchanges for potential pairs: anyone had any luck trading outside the Oz market?

I also find that pairs trading is difficult (but not impossible) if you can't be infront to the screen during market hours. That is why I don't trade the US market (need that beauty sleep).

The only way to do that is to only enter / exit on the open / close - this could work for or against you from trade to trade I'd imagine.

 

[samgribbles]

I concur. Very difficult to catch entries and exits close to the optimal entries/exits. Some occur at open/close when trade execution is difficult to achieve.

CFD provider can be an issue. While GFT has the best platform I've seen, it is mighty ordinary for time to execute 'at market orders', even in highly liquid securities.

Realism - I uploaded the top 6 UK LSE financials. Placed one trade, good signal, very good charts etc, got absolutely spanked. Got to know the stocks I think.

Also I struggle to understand WOR/WES. Surely that pair is more cointegration rather than correlation? WES is mostly Coles, Bunnings and a bit of export coal??

I keep having MND/DOW pop up as an entry. Can anyone comment on that pair if they've traded it a few times?

 

[skc]

I concur. Very difficult to catch entries and exits close to the optimal entries/exits. Some occur at open/close when trade execution is difficult to achieve.

CFD provider can be an issue. While GFT has the best platform I've seen, it is mighty ordinary for time to execute 'at market orders', even in highly liquid securities.

Realism - I uploaded the top 6 UK LSE financials. Placed one trade, good signal, very good charts etc, got absolutely spanked. Got to know the stocks I think.

Also I struggle to understand WOR/WES. Surely that pair is more cointegration rather than correlation? WES is mostly Coles, Bunnings and a bit of export coal??

I keep having MND/DOW pop up as an entry. Can anyone comment on that pair if they've traded it a few times?

MND/DOW/UGL/TSE are good group to trade. DOW/MND is not showing up as a signal on my program, unless it was activated intraday.

 

[korrupt_1]

Look for a big bank announcing bad news in tandem with a 2%+ down day on big volume for a trend reversal.

looks like the dj is down nearly -200pts (2%) tonight... could this be the indicator to watch for?????

but isn't this the beauty of pair trading? does it really matter what the indexes are doing?

 

[Charlie Whiskey]

I haven't had a chance to trial Pair Trade Finder yet, mainly because I'm busy looking for a house.

I thought about the problems above, and I thought I heard someone mentioned that there is a email alert facility in the software? How about using an iPhone to receive alerts and excute trades?

 

[Realism]

Realism - I uploaded the top 6 UK LSE financials. Placed one trade, good signal, very good charts etc, got absolutely spanked. Got to know the stocks I think.

Also I struggle to understand WOR/WES. Surely that pair is more cointegration rather than correlation? WES is mostly Coles, Bunnings and a bit of export coal??

Yeah good point samgribbles, as tempting as it is to jump in and trade every pair of stocks that presents a good signal, it seems to be prudent to concentrate on a basket of stocks that you know well.

And yes, having learnt from my CBA/ASX disaster, I will discard WOR/WES as it is a cross-sector pair (even though it has been a fairly reliable trade to date).

Frustrating day on the market today – I’d identified QBE/AXA and/or QBE/IAG as potential trades, but was a bit slow jumping on them Oh well there’s always next time ……

 

[Realism]

looks like the dj is down nearly -200pts (2%) tonight... could this be the indicator to watch for?????

but isn't this the beauty of pair trading? does it really matter what the indexes are doing?

Wall St is moving a bit south isn’t it ….. we were fairly resilient here today (relatively speaking), it’ll be interesting to see if we can maintain that form tomorrow.

Absolutely agree with you korrupt_1, that’s why pair-trading is so appealing to me, there’ll be trading opportunities regardless of the market direction, and I no longer break into a cold sweat when I turn on the PC every morning to check what happened on Wall St overnight!

 

[n5032245]

Pair trader,

I don't think i have seen your close out of the ABC/GNS trade posted on this thread. GNS has a cracking day yesterday.

 

[Pairs Trader]

oops, appears I forgot to post my ABC/GNS exit.

Sold ABC @ 0.97 (1.04% profit)
Covered GNS @ 2.35 (breakeven)

Attached a screenshot showing the exit signal on the 7th of this month.

 

[bochman]

I wonder how many people lose (or made) money on this one without the exit

 

[Pairs Trader]

I don't promote, condone or agree with people piggy backing my trades, everyone trades at their own risk and should have their own trading plan, because I could get hit by a bus tomorrow then what would they do?

 

[skc]

I don't promote, condone or agree with people piggy backing my trades, everyone trades at their own risk and should have their own trading plan, because I could get hit by a bus tomorrow then what would they do?

I hope you don't get hit by a bus... who's going to keep updating my software licence?

Now check out this interesting plot of PT's 44 trades in this journal.

Pretty clear relationship between holding duration and return.

 

[n5032245]

SKT, that is a very helpful thread. that graph really shows that the trades that are held over 10 days are not profitable.

would this suggest that a 10 day stop loss should be put in place? maybe not as it would (i assume) force those trades to be closed out for a larger loss then would have it one had waited for it to revert back to the mean.

SKT, if you have the data on you and are willing to data mine, a test of how those trades held over 10 days would have performed had they been closed out at day 10 would provide helpful insights into potential stops.

Pairs trader, do you have some sort of analysis along these lines?

 

[skc]

(SKT) SKC, that is a very helpful (thread) post. that graph really shows that the trades that are held over 10 days are not profitable.

would this suggest that a 10 day stop loss should be put in place? maybe not as it would (i assume) force those trades to be closed out for a larger loss then would have it one had waited for it to revert back to the mean.

(SKT) SKC, if you have the data on you and are willing to data mine, a test of how those trades held over 10 days would have performed had they been closed out at day 10 would provide helpful insights into potential stops.

Pairs trader, do you have some sort of analysis along these lines?

Glad it's helpful to you. Your analysis is correct, that pairs > 10 days may actually turned better on 15th day. I wouldn't data-mine this as there are really only a handfull of sample points. I can share with you the pairs and dates if you wish to do so yourself.

PT may have more insights.