New pair trade - Long RIO/Short BHP

[beerwm]

Hi Pair Trader

Thanks for posting this trade.

I;m just a newbie, but i was wondering what degree of divergence you use to trigger an entry point into a trade like this?

and have u tried using stops in the past to protect against a continuing divergence? what results did u find

thanks, and good luck

 

[MRC & Co]

Yeh, at what point, if the divergence continues, do you cut losses and just exit the trade?

 

[BentRod]

Just having a quick look at the charts for this trade but not sure I have done it right in Amibroker??

This is from about the last 6 months with the red line being Dec 1 when pairs took the trade.

Pairs...can you post the chart that you use?

 

[peter2]

There is further info on the website at the bottom of Pairs Trader's posts for those interested.

 

[skc]

Just having a quick look at the charts for this trade but not sure I have done it right in Amibroker??

This is from about the last 6 months with the red line being Dec 1 when pairs took the trade.

Pairs...can you post the chart that you use?

Personally would have charted $RIO/$BHP...

 

[Pairs Trader]

Exited this trade for a small profit;

Sold RIO @ 42.05
Covered BHP @ 31.43
Spread = 10.62

Spread still has a good chance of getting wider over the next week or so, however I see capital better deployed elsewhere.

 

[cuttlefish]

im long RIO this morning from 43.69 and short BHP from 29.72

Pairs Trader - congrats on the small profit - although I'm assuming it hasn't been your most succesful pairs trade it is a vindication at least that it did eventually return to profit. What it did do is demonstrate some of the safety mechanisms built into the pairs concept - so thanks for the example.

I also note that had you not 'averaged down' into the trade then at the moment it would still be showing a loss - so clearly in this instance at least the idea of adding to the trade as it went against you worked.

 

[hardcoremike]

I enjoyed reading your trade. please update us when you have more pair trades.
Cheers

 

[nizar]

Interesting pair this one.
Over the last 4 months very poorly correlated yet strongly correlated when you look at 18 months+

How fair back do you look to measure the degree of correlation?

 

[Pairs Trader]

Thanks guys, please ask any new questions in the pair trade journal https://www.aussiestockforums.com/forums/showthread.php?t=14508 just to keep things tidy.

 

[Barndat]

Hey has anyone that has purchased Pairtraders Software or even just using it on the 30 day trial made any trades worth posting here?

There doesn't seem to be many trades coming up recently or maybe there is just a lack of interest in the system.

I thought we should use this thread to avoid cluttering up PairTraders Stock Trade journal.

Thanks for any replies....

 

[samgribbles]

yes. a few. its not as automated as it might first appear. you still need to put a lot of time into checking for missing data, market caps, news events, fundamental valuations, stock charts. Crashes regularly but restarts OK.

No such thing as free and easy money though!

Having said that. It shouldnt take you too many trades using only a few thousand in a CFD a/c to make up the purchase cost

 

[auric]

agree with sam , crashes a bit also check data as uses yahoo, also for the asx i use

http://tradingroom.com.au/apps/mkt/industrylisting.ac

to check market cap etc

would be good to be able to use own database
i have brought the software as it is a great time saver at present only pairs thrown up for me yesterday to watch
are
mcw/mof
sdg/mof
ori/abc
wsa/omh
wsa/mcr
they still need checking though !


cheers

 

[Barndat]

yes. a few. its not as automated as it might first appear. you still need to put a lot of time into checking for missing data, market caps, news events, fundamental valuations, stock charts. Crashes regularly but restarts OK.

When checking for missing data, do you compare to EOD data from another source? Can u replace data in one individual stock from the other source i.e. Commsec EOD.

With the prg crashing, is this the PTF prg itself or does the computer lock up completely?

I have backtested results from the PT journal and found that you could trade with similar success using EOD data. Since I have had enough screen time to last me a lifetime this would suit me. What do you think?

Thanks..

 

[auric]

does not lock the computer up just the program usually happens if it is updating the data and you do a backtest or something
i would like to use my own data as well hope they do an upgrade for this

 

[charley]

I purchased the software 2 months ago and have been using it daily and finding it very interesting. So far, I have only been paper trading as I have 2 Scottrade accounts; one only has very limited funds and just recently has had shorting capability and the much larger one is an IRA and IRS will not allow shorting with it like I had been planning! I will be adding funds to the lesser account next week and going live. My paper results have been more than I expected, and yes, I know real trading is much more risky. But given my learning curve in the past successes, I'm sure I can make money in the future with the gained knowledge! I consistently make $75 to $300 profit in between 4 days and 4 weeks using $3000/$3000 long and short pairs. Now, I am being much more selective in my pairs and found some that produce very poor results and avoid those types and others that I will pursue.

Given more interest in this forum and other contributors, I will post trades a day late and compare notes as to potential, %, spread, volitility, etc. There's lots to learn and I would like to hear from those that have been in it for a while longer than me!

 

[Freddy]

If you go back through the old thread, you will find my summary that I use to trade. Up 66% in 4 months on $5000 capital and trading 1000 shares each time on each leg.

 

[Wysiwyg]

On the surface this idea is silly. The price action from December still shows correlation and the divergence of price. BHP has gained 40% and RIO has gained 115%. Pair trading correlated stocks is strange.

With the help of others at Morgan Stanley at the time, including Nunzio Tartaglia, Bamberger found that certain securities, often competitors in the same sector, were correlated in their day-to-day price movements.

When the correlation broke down, i.e. one stock traded up while the other traded down, they would sell the outperforming stock and buy the underperforming one, betting that the "spread" between the two would eventually converge.

This is pair trading?

 

[cooper1308]

This is why I find pure technicals difficult to interpret. If you change a few data points, the trade looks like a completely different setup (in my example perfect)... Not just in Pair Trading, but in general...


BHP/RIO 3 month

5 Year

I guess the use of statistics (i.e z-score) helps remove the bias that can be associated with relying purely on charts.

 

[Sugar Dunkaton]

has the big pair trade journel thread been taken down?