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I can see how this strategy can work with the futures makets. But
with individual stocks I have my doubts. And the reason is ... News.
That is what moves individual stocks. When you backtest, you are
looking at the results of when the news is in your favor. But what
about the future.
Maybe I am not seeing the total picture and someone can explain it to
me.
BTW. For correlation for futures, take a look at this
<http://www.csidata.com/uawebcharts/MarketReport/FuturesCorr.htm>
John
--- In amibroker@xxxxxxxxxxxxxxx, "Mr Valley" <valleymj@xxxx> wrote:
> What is the inverse correlation of SP500 vs. Swiss Franc ?
> Is it worth a look as a valid pair at times?
>
> http://www.sharelynx.net/Markets/Charts/DigisysFut.htm
>
> Just a Thought…
> Mr Valley
>
>
> -----Original Message-----
> From: epintoem [mailto:epintoem@x...]
> Sent: Tuesday, April 29, 2003 7:45 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: (More) Real World Trading (for epintoem)
>
> I trade futures so I dont have the problem that you have for trading
> shorts. I do have a couple of ideas for trading shorts. I dont have
> any formula for correlating the stocks that need to be traded in
pairs.
>
> I use trend line breaks to trade shorts.
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
> <chuck_rademacher@x> wrote:
> > Average holding period for my typical trading is something like
20 days.
> >
> > There are all kinds of reasons for shorts not doing as well as
longs.
> > Among the primary reasons is the fact that you can only make a
100% on
> > shorts and there is no limit on longs. The up-tick rule is a
> nuisance and,
> > you are correct, the typical down move is quick compared to the
more
> > trendier up move.
> > -----Original Message-----
> > From: epintoem [mailto:epintoem@x...]
> > Sent: Tuesday, April 29, 2003 6:41 PM
> > To: amibroker@xxxxxxxxxxxxxxx
> > Subject: [amibroker] Re: (More) Real World Trading
> >
> >
> > 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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