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Pairs Trading Backtest as One Strategy?


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Pairs Trading Backtest as One Strategy?

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  #1 (permalink)
Los Angeles, CA
 
 
Posts: 4 since Sep 2015

Hi,

Does anyone know which if any Retail Trading Platforms can backtest a Pairs Trading Strategy using only one chart and as only _one_ native strategy? (ie not two strategies with X and Y swapped in the second one)

1. Can Tradestation do this using Portfolio Maestro?
2. Can Multicharts do this using their Portfolio Trader?
3. Can Ninjatrader do this natively?

Importantly, I am looking for a platform that will natively shows the PnL total trading both legs in one report...ie dont want to have to add together two strategy reports outside of the platform. Also want to be able to optimize _one_ strategy and have it use the same parameters to trade both sides.

-S

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  #2 (permalink)
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: XTrader and Cloud TT
Broker: Advantage Futures
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The way I have done it in Tradestation before is as follows.

Assume we have two Instruments X and Y.
Chart 1 has X as data1, X as data2, Y as data3
Chart 2 has Y as data1, X as data2, Y as data3

Write a single strategy for the pairs trade. At the beginning of the strategy you have some simple code that detects whether data1 is equivalent to data2 or data3. Now the strategy knows which instrument the chart is trading. So when it comes to executing orders you do something like "if data1 is same as data2 then execute orders for X otherwise execute orders for Y".

As you state the problem with this is that you have two performance reports and two sets of trades and you need to do your own calculations to add them together, which is a major pain if you are doing optimizations.

In theory you should be able to do it in Maestro though, which should combine the results into a single performance chart for you.

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