iCharts Discussions

[Alchemist]

After trading for almost last 10 years very actively and sharing a lot of strategies with fellow traders, what I found was that each strategy had its own pros and cons... every strategy will have a good run but every now and then will also have a bad run which will cause huge drawdowns in any accounts.

Now while an individual trader can live through these ups and downs, however the professional traders/hedge funds who keep getting fresh capital infusion through new customers every month cannot live with a probability of running into a 'bad series of trades' in any month. This is for 2 reasons:

1) While the existing customers may live through it, the new customers added that month may get huge losses and that may lead to exodus and bad reputation.

2) When trade with huge quantities, small yet consistent returns per month matter more to customers than large but sporadic or inconsistent profits.

So they create strategies which do not completely rely on their accuracy to predict the market movements, but rely on more conservative and neutral strategies. One of them is Delta hedging strategy which I have been actively trading and post everyday about in Icharts forum under a different thread.

I will be dedicating this thread to the second strategy big money deploys, called Pair Trading.

More to come on it in the next post.

Cheers
SH

[anusantosh]

Interesting... well awaited boss...

[Alchemist]

Pair trading requires looking at past correlation, co-integration, spreads, ratios etc. I would not spend my energies explaining what these are as people can easily google about them.

Once suitable pairs are found, one needs to look at backtested data for these pairs, average holding time etc before enterting into the trade.

It requires a lot of money management and cash neutrality as well.

I will be positing some of my trades that have successfully gone through all of the above filters to see how they perform.

THIS IS JUST AN EXPERIMENTAL THREAD AND PLEASE DO NOT START TRADING THESE BLINDLY. SEE FOR A FEW WEEKS FIRST.

Cheers
SH

[chetan83]

All the best Alchem

As usual new thread on a very old method on pair trading.........

Keep shining !!

[Alchemist]

Pair trade initiated today

Sold BankIndia Fut at 135.05 (1 lot 9000 qty)
Bought OrientBank Fut at 140.20 (1 lot 9000 qty)

Cheers
SH

[Alchemist]

[chetan83]

[Alchemist]

[kartik_krish]

Well done Alc, are you using beta decoupling, or ADF to determine stationarity and ideal pairs to trade?Further are you using ratios or spreads?

[Alchemist]

[chetan83]

[AJAY.4ACE]

quantsapp premium subscriber wil get all pair co relation data in fno along with their relation and backtest too ....it will eliminate ur 90% hardwork finding d trades.......