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Chuck,
I can probably see why the shorts counldnt be working as well as the
longs.
The nature of the market is to buy and hold. So the trend for the
long tends to be longer than the trend for the shorts which to me
would seem to be sharp and of a shorter duration. Shorts are traded
mostly by short term traders.
What is the average holding term you are looking at?
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> You may recall that I have been making a concerted effort to come up
with
> some system ideas using "pairs trading". I don't know how
successful any
> of you have been at coming up with systems for shorting stocks, but I am
> extremely frustrated by the need to maintain a dollar and/or beta
neutral
> portfolio in keeping with the rules of the funds that I manage. As
a rule,
> my short trades are lucky to break even. Fortunately, my long
trades are
> quite profitable.
>
> I am going to put forth some ideas that should have been more
obvious to me
> some time ago and may already be obvious to you. Like a lot of
you, I have
> what I think are excellent systems for trading the long side. I
also have
> excellent systems for trading "pairs". My pairs trading has been 100%
> isolated from the other styles of trading that I do.
>
> My daily search for pairs to trade never really had a starting point
> (watchlist). The system takes each of the currently active stocks
(8,000+)
> and tries to find another stock to trade against it. There was no
starting
> bias. The system looks for the most highly correlated pairs of
stocks to
> trade; one long and one short.
>
> Late yesterday, I had a thought come to me to take the just the buy
signals
> generated by my best "long" system and only look for a pair to trade
against
> each of those. It's early days in the research, but it looks like an
> exceptionally good idea. Instead of making a mediocre 1.5 to 2%
per month,
> the research suggests almost doubling that return while still
maintaining a
> dollar, beta, sector and volatility neutral stance.
>
> Any comments would be appreciated and I'd be happy to work closely with
> anyone interested in pursuing this endeavour. AmiBroker is
definitely the
> tool of choice for this job, hence my posting to this group.
>
> Cheers
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