here's a tutorial for pair trading

[Harrytrader]

http://www.tradetrek.com/Education/pairtrade/market_neural_strategy02.asp

 

[SOCRATES]

Cher monsieur, savez-vous que les marches aux divises ne marchent pas de la facon qu vous pensez?
Elles marchent d'une facon tout a fait differentes. C'est a dire, elles marchent d'accord avec les manipulations des grand marchands,qui choisisant une pair vulnerable, ils procedent a vendre l'une, et a la meme fois, achetant l'autre, c'est tres amusant ! En particulaire, ils ont les moyens pour cacher leurs activites, faisant du camouflage avec les nouvelles, etcetera..c'est a dire, que toutes ces idees mathematiques sont des excuses et vraimant de betises.

English Translation:~
Dear Sir, are you aware that currency markets do not operate the way you think ?
They operate in a totally different way. That is to say they operate in accordance with the manipulations of large traders, who choose a vulnerable pair, then proceed to buy one and sell the other,this is very amusing ! In particular, they have the means of hiding their activities, making use of the news as camouflage, etc., that is to say, that all these mathematical ideas are excuses and truly nonsense.

 

[Trader333]

SOCRATES,

If this is the case and they hide what they are doing, is it not possible that some equally large operation decides to do the same in the opposite direction ?


Paul

 

[SOCRATES]

SOCRATES,

If this is the case and they hide what they are doing, is it not possible that some equally large operation decides to do the same in the opposite direction ?


Paul

I hadn't seen your post otherwise I would have replied sooner.

Yes, but to give you some idea of the power and might of these guys when they gang up
together, just reflect on what happened before the pound was taken out of the ERM.

It is patently obvious that these are forces that even governments cannot go against, once they start to roll.

 

[chump]

Out of interest in something I am ignorant about do these 'players' operate in commodities.Possibly oil?

 

[darktone]

Just noticed this thread


Ive been looking at E$ and £$ as a pair possibility, early days with the speadsheet results but definately something there over the longterm at least..anyone else working in this area? pair suggestions / clean data links etc?

 

[Trader333]

I frequently pair trade stocks with the aim of having a "market neutral" position and I have found that it works well.


Paul

 

[TheBramble]

Ive been looking at E$ and £$ as a pair possibility...

DT I've also been looking recently at currency correlations and, obviously, there is something there.

However, I think, if only semantically, it's incorrect to consider using €$ and £$ as a 'pair'. All FX instruments are already pairs.

I guess you could stretch the point, but only be using 2 pairs with no commonality at all.

But if there were a common element (as in the $ in your example) - how would you trade a situation where the $ was trending strongly upward?

 

[darktone]

hello T333 bramble

What ive noticed about £ and E against $ is the difference between their prices changes.
ie (£$ pip value - E$ pip value) = difference

at least from 96 - 00 using weekly opening prices this value fluctuated (approximately) between 4000 / 6000 pips. This range could be traded by taking opposite positions in each pair.
ie when difference = 4000 pips you would go long £ and short E in equal pip value and aim to close the position when the difference is nearer 6000 pips..

ive looked at 1 hour data over a period of 1 month but the results more often where quite poor (many of the months results seemed to trend).

Of course the perfect scenario would be 'a pair' that ranged well over time, it would akin to buying and selling a value of a ranged indicator..

BTW this is something ive noticed and followed up so sorry if this isnt pair trading etc as such😉