Hi manst, pls find below the replies to your queries :
1) how to find best suitable pair?(on daily chart)
The best way to find the most suitable pair would be by using an exploration. But since I am not very good at that writing one, I manually scan the pairs using the daily chart in the evening to see any opportunities for the next day.
2) I have found that many signals on the chart.when std dev is increased signals get reduced.which std dev is best?
I prefer to use 2 SD as 95.45% of the values lie within the 2 Standard Deviations of the Mean (3 SD covers 99.73% while 1 SD covers 68.27% values). Higher the SD one uses, the signals get reduced but it has a higher probability of returning to the mean (this is how I interpret the same - pls google SD for better understanding). Also, though higher SD can give better results, there is also a possibility that some good opportunities with lower SD can be missed out.
3) how long should be in trade? means when to exit?
It all depends on your risk & reward appetite. I have seen pairs giving more that 60-70% profits if one holds the pair for 2-3 months. But again, the losses can also go up drastically. Though, one needs to give some time for the pairs to show its true potential, according to me, one should hold the pairs for atleast 3-5 days. But it is also possible that the pairs can reach one's target level within a few minutes. In that case, it is always best to square off and take profit.....If one has 2 lots, one can take profit with 1 lot and trail the SL with the other lot.
4) are you trading with this?
Yes. I use the charts to enter, monitor & exit from a trade. But if you wish to use the same, request you to first paper trade and only after having understood the system & the risks involved in it, should you take the plunge. Though it is said that Pairs Trading is a Market Neutral strategy and will profit most of the times, it can give huge losses as well.... In case of directional trades, we enter with only one scrip and if the strategy goes wrong, the losses will happen in only one scrip....Pairs Trading involves 2 scrips and if things have to go wrong, they can go wrong in both the scrips. Hope you understand what I am saying.
Though I have been studying Pairs Trading since more than a year & half, I started trading with pairs only since the last 4-5 months. Since not much info is available on this strategy, you will need to do a lot of learning before you decide to go ahead with this strategy.
In case of any further doubts PM me your mail id / cell no. and I will get in touch with you. All the very best to you.:thumb:
Regards,
Pankaj
1) how to find best suitable pair?(on daily chart)
The best way to find the most suitable pair would be by using an exploration. But since I am not very good at that writing one, I manually scan the pairs using the daily chart in the evening to see any opportunities for the next day.
2) I have found that many signals on the chart.when std dev is increased signals get reduced.which std dev is best?
I prefer to use 2 SD as 95.45% of the values lie within the 2 Standard Deviations of the Mean (3 SD covers 99.73% while 1 SD covers 68.27% values). Higher the SD one uses, the signals get reduced but it has a higher probability of returning to the mean (this is how I interpret the same - pls google SD for better understanding). Also, though higher SD can give better results, there is also a possibility that some good opportunities with lower SD can be missed out.
3) how long should be in trade? means when to exit?
It all depends on your risk & reward appetite. I have seen pairs giving more that 60-70% profits if one holds the pair for 2-3 months. But again, the losses can also go up drastically. Though, one needs to give some time for the pairs to show its true potential, according to me, one should hold the pairs for atleast 3-5 days. But it is also possible that the pairs can reach one's target level within a few minutes. In that case, it is always best to square off and take profit.....If one has 2 lots, one can take profit with 1 lot and trail the SL with the other lot.
4) are you trading with this?
Yes. I use the charts to enter, monitor & exit from a trade. But if you wish to use the same, request you to first paper trade and only after having understood the system & the risks involved in it, should you take the plunge. Though it is said that Pairs Trading is a Market Neutral strategy and will profit most of the times, it can give huge losses as well.... In case of directional trades, we enter with only one scrip and if the strategy goes wrong, the losses will happen in only one scrip....Pairs Trading involves 2 scrips and if things have to go wrong, they can go wrong in both the scrips. Hope you understand what I am saying.
Though I have been studying Pairs Trading since more than a year & half, I started trading with pairs only since the last 4-5 months. Since not much info is available on this strategy, you will need to do a lot of learning before you decide to go ahead with this strategy.
In case of any further doubts PM me your mail id / cell no. and I will get in touch with you. All the very best to you.:thumb:
Regards,
Pankaj
. Anyways over the course of time i have in my opinion made my trading system quite viable and have been trading with it for the last 6 months with quite satisfactory results. I am planning to start my trading journal blog. you should check it out. I would like to compare notes if you have been trading your pairs trading system as well.