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Spread / Pairs Trading - the allure and the reality
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Spread / Pairs Trading - the allure and the reality

  #81 (permalink)
Normal Wizard
Sydney, NSW, Australia
 
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Is there anywhere I can view spread charts with candlesticks? I am interested in looking at the price action of spreads and seeing if there's anything to it.

Understanding yourself is just as important as understanding markets.
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  #82 (permalink)
Elite Member
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Is this useful?

https://futures.io/download/vip_elite_circle/1173-download.html?view

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  #83 (permalink)
Elite Member
Nanjing, NJ
 
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here're 2 charts from cgq qtrader on EP(ES) reverse calendar spread and NOB spread, just the opposite each other

Attached Thumbnails
Spread / Pairs Trading - the allure and the reality-150912_225443_cqg_qtrader_chart_epw1_-_e-mini_s-p_reverse_calendar_spread_1_equalized_active_dai.png   Spread / Pairs Trading - the allure and the reality-150912_225540_cqg_qtrader_chart_nob_-_nob_-10yr_-_30yr-_ics_spread_equalized_active_daily_contin.png  
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  #84 (permalink)
Normal Wizard
Sydney, NSW, Australia
 
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shzhning View Post
here're 2 charts from cgq qtrader on EP(ES) reverse calendar spread and NOB spread, just the opposite each other

the one on the left looks relatively "normal", exceptionally clean trend stands out and the one on the right is not what I have seen in any product and doesnt look readable but looks like you would just apply a mean reversion strategy. Its hard to make out any clear levels and some of the breaks from the mean look quite erratic, I would have a difficult time figuring out when to exit when a position goes against me.

Understanding yourself is just as important as understanding markets.
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  #85 (permalink)
Elite Member
san diego
 
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TickedOff View Post
the one on the left looks relatively "normal", exceptionally clean trend stands out and the one on the right is not what I have seen in any product and doesnt look readable but looks like you would just apply a mean reversion strategy. Its hard to make out any clear levels and some of the breaks from the mean look quite erratic, I would have a difficult time figuring out when to exit when a position goes against me.

The second chart is trading a range which is what you want for pairs trading. Since its a range and you expect mean reversion, a pairs trader would scale in his capital when it goes against him. An ultimate stop could be placed at some multiple of standard deviations from the mean.

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  #86 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
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kevinkdog View Post
I have been swing trading calendar spreads for a number of years. I trade most of the ags, softs, energies, etc.

Yes, you do have to get direction right for the trade to work.

You can forget about arbing spreads - people much smarter and faster have this locked down.

You have to be really careful when looking at any prices unless 1) they are settlement prices or 2) they are exchange traded spread prices. You can't just throw up a candlestick chart of Nov Beans minus July Beans and expect to get something meaningful. This is because last trade price times will be different. You could accurately chart the exchange quoted spread on Nov/July Beans.

Many times spreads tend to trend more smoothly than the outrights.

Ag spreads many times follow seasonal patterns. Summer 2012 was an exception to that, as I found out.

Many pros in Treasuries are spreading. I know a mid size hedge fund that always and only spreads.

Margins are greatly reduced for spreads, so you can probably trade more pairs, or greater size, than an outright account.

You can easily lose money. "How I Lost 1 Million Dollars..." is a great book on a Soybean spreader who got crushed (no pun intended).

You will pay double commissions for each trade.

Also, any kind of backtesting is a TON harder with spreads, even if you have access to the exchange spread feed (Tradestation, for example, in their infinite wisdom, does not offer the exchange spread feed in their data). You can't really do continuous contracts. I've written giant custom macro spreadsheets to perform some of this backtesting. It is a pain.


One thing to think about: spread trading might have opportunity because so few people take the time to look at it, and learn about it.

Are you spread trading presently? Did the August sell off have a large effect on your spreads?

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  #87 (permalink)
Market Wizard
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datahogg View Post
Are you spread trading presently? Did the August sell off have a large effect on your spreads?

Not really. Lost a little bit in spread trading in August, but made it back (and then some) in September. Slightly down overall in 2015 for spread trading.

If you have any questions please send me a Private Message or use the futures.io "Ask Me Anything" thread
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  #88 (permalink)
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kevinkdog View Post
Not really. Lost a little bit in spread trading in August, but made it back (and then some) in September. Slightly down overall in 2015 for spread trading.

I'm in a similar situation. I eventually moved into profit this month and watching the May 16 Soybean-Corn spread closely to make sure it doesn't tank on me.

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  #89 (permalink)
Patience my young padawan
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Currency pairs vs. Bond/Commodity spreads

Does anybody here trade currency pairs based on bond/commodity spreads? I have found some interesting correlations but no "holy grail" yet (and apologies to the non-believers for my ridiculous attempt).

I was wondering if anybody here with actual experience could provide an insight. I don't have a great strategy other than ES and I really need to diversify!!

For instance, (Gilt - ^TNX) and 6B would make some sense to me but still trying to find the right conversion factors between Gilt and TNX and 6B...

I have found other relationships but getting it on a strategy that works seems to be the challenge. Mean reversion is apparently not the way to go, maybe a breakout of +/- 1 Std or some conversion with % change of the variables, a good de-trender dunno...

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  #90 (permalink)
World'sWorstTrader
Knoxville Tennessee USA
 
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?


Of these 2 spread data sources (Moore Research Center vs SeasonAlgo) which is the best in terms of
results and data?

Thanks in advance.

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