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#1
07-18-2007, 04:03 PM
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Member
Join Date: Jun 2007
Posts: 63
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diversifying trading pairs?
Hello
I've been researching pairs trading for the last few months, and considering adding them to my trading strategies arsenal to diversify risk a little bit. Are there any pairs traders around? What percentage of your trading capital would you allocate to a pairs trading strategy? Also, what kind of return would you be happy with? thanks | |
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#2
07-23-2007, 04:30 PM
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Senior Member
Join Date: Jun 2007
Posts: 109
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pairs trading is certainly a nice way to add some diversification to your trading profits. Beware though: pairs trading is quite capital intensive and best done through a prop shop. They love that!
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#3
07-27-2007, 12:39 PM
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Member
Join Date: Jun 2007
Posts: 63
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diversify, diversify, diversify. That's the keyword. Don't just stick to one pair. Trade several different pairs, a few in each sector.
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#4
08-15-2007, 04:43 PM
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Member
Join Date: Jul 2007
Posts: 86
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sorry about my ignorance, but what is pairs trading exactly?
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#5
08-16-2007, 01:25 PM
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founder of Trading-Lab
Join Date: May 2007
Location: New York, NY
Posts: 296
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Pair trading refers to a statistical arbitrage or spread trading strategy whereas you trade a pair of correlated stocks and try to capture discrepancies in relative strength or fundamental analysis. You go long one and short the other, looking for a reversion to the mean.
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Happy Trading! | |
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#6
10-22-2007, 08:57 PM
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Super Moderator
Join Date: Oct 2007
Posts: 621
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i didnt know what pairs trading was either.
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#7
10-23-2007, 04:56 PM
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Member
Join Date: Jun 2007
Posts: 45
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pairs trading is sometimes referred to as statistical arbitrage, even though it's not exactly the same thing.
pairs trading is very capital and commission intensive so it's brokers' favorite strategy! | |
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#8
11-02-2007, 03:27 PM
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Member
Join Date: Jul 2007
Posts: 44
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when trading pairs on an intraday basis, you have to remember you have to get both of your sides' orders (long and short) executed at exactly (or very close to) the opening price you have set for your pair, as you are trading the pair based on "pair price" rather than individual stock prices.
if you get your executions prices all messed up, you end up buying or selling a pair at different prices. thus, lowering/increasing your overall profit/loss on them. Getting fills at the prices you want is not always easy on listed stocks, but if you are fast enough to route your orders to other markets (ECNs, etc) when they are on the bid/ask, you will be fine | |
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