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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)
Transatlantic
Los Angeles, CA
 
 
Posts: 11 since Sep 2015
Thanks: 0 given, 3 received

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)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
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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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  #3 (permalink)
jkepha
San Antonio, TX
 
 
Posts: 27 since Apr 2020
Thanks: 7 given, 6 received


Hello!

1) Did you figure this out? Trying to run a pairs trading strat as well

2) What are you entry and exit points? I'm just not sure how to implement a pairs trading strat successfully. When I throw two instruments on tradingview, its seems apparent which to go long and short on. But when you move the time of the chart/zoom in and out, the relationship changes. Maybe I would just have a point in time that is the starting point and once the prices diverge open the trade and exit when applicable, and then just keep moving the start time of when to calculate percentage change?

Let me know if you have any ideas please sir/maam! Sorry if this is somewhat obscure.



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  #4 (permalink)
Transatlantic
Los Angeles, CA
 
 
Posts: 11 since Sep 2015
Thanks: 0 given, 3 received

SMCJB,

Thank you for your awesome idea - I have coded that up and will have it running in TS Portfolio Maestro shortly.

Jkepha, as you can see this is still an open issue. It is very frustrating that no retail platform offers a good Pairs trading solution (ie not having to use two charts).

My current plan:

1. TS Portfolio Maestro
2. Multicharts Portfolio Trader (but I have issues with their builtin Pairs Strategy - I dont like it)
3. Matlab

I have Matlab working but so maybe I should just run with that.

Transatlantic

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