Pair Trading - Exploring The Low Risk Statistical Arbitrage Trading Concepts

[Vevensa_P]

@VJAY @Vevensa_P
Are you going to hold positions for pairs or do intraday trading?

Intraday only.

 

[travi]

PFC / RECLTD seems like a good pair, just noticed it.
IDFCBANK / CAPF is another.

 

[VJAY]

@VJAY @Vevensa_P
Are you going to hold positions for pairs or do intraday trading?

Dear Ub,
No am testing only in positional ....testing intraday with small qty

 

[UberMachine]

Dear Ub,
No am testing only in positional ....testing intraday with small qty

Ok. This works great for positionals but I think this needs more tweaking (like look back period, buy ell price) for day trading. Would try it before posting more details on this. Have you got any results from paper trading.

 

[VJAY]

Ok. This works great for positionals but I think this needs more tweaking (like look back period, buy ell price) for day trading. Would try it before posting more details on this. Have you got any results from paper trading.

Dear UB,
for positional whats the reliable way to enter in trade?as per ncube he enter trade @ last day close @ open ...its still confussing me.ncube might answer it...for positional entry little difficult I think as what price we enter?enter both pairs @ opening itself with market order is one way ....if we wait for yesterdays close price its rarely get if pairs moving....Which way you take entry?
I just started test it in positional ...intraday its working

 

[UberMachine]

Dear UB,
for positional whats the reliable way to enter in trade?as per ncube he enter trade @ last day close @ open ...its still confussing me.ncube might answer it...for positional entry little difficult I think as what price we enter?enter both pairs @ opening itself with market order is one way ....if we wait for yesterdays close price its rarely get if pairs moving....Which way you take entry?
I just started test it in positional ...intraday its working

In fact, pair trading works well with positionals and gives good returns. You can even buy both the securities at the next day's open price (@ncube may throw more light on it). I am a bit hesitant to advise on this since I haven't live traded on them so far.
For it to work intraday, you must update data more regularly for all parameters (look back period, buy and sell price, z-score threshold)

 

[VJAY]

In fact, pair trading works well with positionals and gives good returns. You can even buy both the securities at the next day's open price (@ncube may throw more light on it). I am a bit hesitant to advise on this since I haven't live traded on them so far.
For it to work intraday, you must update data more regularly for all parameters (look back period, buy and sell price, z-score threshold)

ok... For intraday I not changing look back periods...only using what ncube shared with us ...I think its last 200 days data for Pvalue and 20 days data for Z score...

 

[ncube]

In fact, pair trading works well with positionals and gives good returns. You can even buy both the securities at the next day's open price (@ncube may throw more light on it). I am a bit hesitant to advise on this since I haven't live traded on them so far.
For it to work intraday, you must update data more regularly for all parameters (look back period, buy and sell price, z-score threshold)

@VJAY,

For positional I dont force trade, so I keep limit orders the previous night around the close price of the stocks. Most often based on my experience atleast 1 of the stocks will get executed at the limit price in the morning, once a trade is executed I will convert the 2nd trade to SL-M at the low of the 1min candle pivot. If the price does not hit I will wait till the 3:15 and execute it at market price so that the pairs are hedged before market closes.

However If you want to ensure the trades are always executed you can follow this approach and it can also be used for day trading:

Wait for the 1st pivot to be formed on a 1min candle and place SL-M/Limit order above/below the pivots for the stocks in the identified directions.

Another method which works for day trading and you guys can explore:

In pair trading Y stock direction is the prominent direction in which the stocks would most likely move, hence one can use the Bracket Order (BO) to make quick profits as follows:

Direction to trade: Y-Stock Direction as per pair analysis
Trading rules: Use 1min candle pivot breakout or 15min candle breakout for both stocks in the same direction as Y-stock
Profit & SL target: About 0.03% of the stock price.

For example: If the Zscore is -2.5, which means as per our pair analysis the Y stock need to be bought and X to be sold. But in this we will not short X, rather we will buy as we want to trade in the prominent direction of Y and it will be a quick short term trade.
Say Y stock price = 300 & X Stock price = 500
Now wait for the 1st 1 min candle pivot or 1st 15 min candle to be formed.
Place SL Buy BO at the top of the pivot or 15 min candles for both the stocks with SL & Profit target which is equal to 0.03% of the stock prices. i.e Ystock = 300 * 0.03 = 0.90 paise & Xstock = 500*0.03 = 1.5 rs.

There are many ways one can use pairs logic and execute trades, hence I suggest one can explore the method one is comfortable with.

Be Happy & Enjoy Trading!!!

 

[VJAY]

AXISBANK:S 660.05 :ICICIBANK:B338.9
pVAlue:0.0318
Zscore:2.193

 

[VJAY]

Dear ncube,
can we get following fig by one coding?if its possible the we can claculate Z score whenever we need to put CMP price of pair in this excell file which shared in zerodha's pairtrading tutorial....

View attachment 27821

Dear ncube ,
I think you missed my this post