Pairs Trading UK & US Stocks Journal

This is a discussion on Pairs Trading UK & US Stocks Journal within the Trading Journals forums, part of the Reception category; opened this trade last night, another US shipping pair, Long Entry SFL - 10.94 Short Entry VLCCF - 16.54 Ratio ...

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Old Feb 5, 2009, 1:50am   #15
 
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stocktrader77 started this thread opened this trade last night, another US shipping pair,

Long Entry SFL - 10.94

Short Entry VLCCF - 16.54

Ratio chart is oversold and at the bottom of its recent trading range.
Attached Thumbnails
sfl-vlccf.jpg  
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Old Feb 5, 2009, 10:40am   #16
 
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Quote:
Originally Posted by stocktrader77 View Post
at the end of the day the market will give you what the market will give you. your return is a function of your discipline, risk tolerance, objectives, use of leverage, number of trades taken and general market conditions.
I appreciate that ST - entry is only a small part of a profitable system.

Couple more questions:

1) How are you trading these pairs, via CFD's or Spreadbetting?
2) When you say 25%, do you mean 25% of your margin or you risk 25% of your capital?
3) How do you manage losses, does PairTrade Finder give you exit signals on a loss making trade as well, or do you have some hard stops in place? If you do what do you base them on?

Appreciate your time on this ST.
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Old Feb 5, 2009, 1:05pm   #17
 
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stocktrader77 started this thread I use direct equities and CFD's. Risk management is 25% of my account, for example $100,000 account = have no more than $25,000 exposure in any one position. We don't use stop losses for pair trading, risk is mitigated through staying market neutral, spread out risk and prudent position sizing, only close a position on an exit signal which occurs when the pair comes back to its mean, profit or loss. stops actually decrease performance and your a sitting duck if you use them, for the brokers, market makers, day traders and other shady operators.
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Old Feb 5, 2009, 2:25pm   #18
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Hi stocktrader77,
Quote:
Originally Posted by stocktrader77 View Post
. . . We don't use stop losses for pair trading, risk is mitigated through staying market neutral, spread out risk and prudent position sizing, only close a position on an exit signal which occurs when the pair comes back to its mean, profit or loss.
What happens if the pair continue to diverge, rather than to revert back to the mean? Do you literally sit tight and pray that there hasn't been a seismic shift in the funnymentals causing a split in the correlation of the pair? I guess what I'm trying to say is that, without stops in place on every trade, are you not running the risk that sooner or later you're going to be taken out by a black swan event?

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stops actually decrease performance and your a sitting duck if you use them, for the brokers, market makers, day traders and other shady operators.
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I feel a spot of blackmail coming on here! I could arrange for every day trading member of T2W to spam you to death, unless of course it was in my interests not to . . .

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Old Feb 5, 2009, 11:08pm   #19
 
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stocktrader77 started this thread yes every now and then you find yourself in an ugly trade, thats just trading, having small positions relative to your account size is the key to mitigate black swan event risk. I have nothing against day traders, I use to be one myself, I was just saying they know where the majority of stops lye and they will gun for them, ive seen it in the flesh, but if someone can trade successfully with stops, kudos to them.
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Old Feb 6, 2009, 12:51am   #20
 
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stocktrader77 started this thread Entered two new trades

Long Entry BEZ - 13.01

Short Entry AIMC - 7.25
-------------------------------
Long Entry CMCSA - 13.74

Short Entry SJR - 16.51

Both are US pairs.
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Old Feb 6, 2009, 7:57pm   #21
 
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stocky, thanks for all that , IE screen shot and so on..
I guess it is more like a swing strategy..
But
-did you ever got in and out of a trade in a day ?
-how do you take your profit ? in % ? in $? other ?
-do you average ? i mean you go long and short one day and then you ad long / short a day or 2 latter ?
-do you scale in ?
-do you scale out ?

thanks

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