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Hi Tomasz,
Thank you for your insight, and I can see from your code how it will
work. My question then for you is how this type of spread strategy
will be back-tested? If I utilize the code you provided and
optimize/run it on symbol A it will just give me all the entries and
exits for symbol A, maximizing for results that will provide the
greatest profit or whatever metric for symbol A, and vice versa for
symbol B. However, the real optimal result of the spread trade is
likely neither the optimal result for A nor that for B because markets
are not wholly efficient. So in this case, how do you optimize for a
pair trading strategy where the goal is to maximize the simultaneous
entry of long A short B for entry and short A long B for exit? I think
foreign() and some synthetic (composite) will still be required, no?
--- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@xxx> wrote:
>
> Hello,
>
> Marcin is solving strictly technical problems.
> So he gave you technical answer, without actually
> taking care if it is philosophically correct way to do things.
>
> Yes if you are using artificial price, they won't work without
> turning bounds checking off, but that's not the preferred way to go.
> Preferred way is not to create illusion (i.e. artificial prices)
> but to reproduce actual trading.
>
> So, instead of creating artificial spread symbols,
> you should just go long (for example) 500 shares of symbol A
> and short 40 shares of symbol B.
>
> And it is very easy to do and was explained on this list MANY times.
>
> YourSystemEntrySignal = ....
> YourSystemExitSignal = ....
>
> if( Name() == "SymbolA" )
> {
> Buy = YourSystemEntrySignal;
> Sell = YourSystemExitSignal;
>
> SetPositionSize( 500, spsShares );
> }
>
> if( Name() == "SymbolB" )
> {
> Short = YourSystemEntrySignal;
> Cover = YourSystemExitSignal;
>
> SetPositionSize( 40, spsShares );
> }
>
> Note that you are entering LONG trade on A and SHORT trade on B
using same signal.
>
> Best regards,
> Tomasz Janeczko
> amibroker.com
> ----- Original Message -----
> From: "janhausd" <janhaus@xxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Friday, January 30, 2009 7:18 PM
> Subject: [amibroker] Re: PairTrading on Amibroker
>
>
> > Hi Tomasz,
> >
> > I had sent several emails to Ami support, and this advice was included
> > on one of the responses. Regarding the pairs trading, perhaps I should
> > explain what I am doing a bit better, it's a spread trade, which
> > involves normalizing two instruments based on some formula. What I
> > actually am doing is creating a formula, for example, 5 * SymbolA -
> > 0.4 * SymbolB = spread price. Buy @ this spread price (buy A, sell B)
> > when condition Z is met, sell (sell A, buy B) when condition Y is met.
> > I had thought most ppl trade pairs this way, but perhaps this isn't
> > the case.
> >
> > Like Angelo, I couldn't figure out a good way to represent the
> > entering one symbol and exiting the other in backtesting, so I used
> > foreign() to create the synthetic, and based the buy/sells and
> > buy/sell prices on the synthetic. When I backtest, I found that both
> > of these options are necessary for me otherwise 1. the synthetic price
> > I generate won't work since it may be beyond the bounds of the HL
> > range, and when I get in at some synthetic price, i.e. 300, and if
> > ruinstop isn't disabled, I get stopped out at price 0 or something
> > very small like that, perhaps due to data holes.
> >
> > I had sent an email to support asking for the best way to go about
> > backtesting such a spread strategy, but did not receive any response.
> > If you have any better suggestions, I've eager to hear them!
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "Tomasz Janeczko" <groups@> wrote:
> >>
> >> Hello,
> >>
> >> It's very important to include
> >> > SetOption("priceBoundChecking",False);
> >> > SetOption("DisableRuinStop",True);
> >>
> >> WRONG!
> >>
> >> This should never be used for pairs trading.
> >> If you need that it means that you code is wrong
> >> (you are attempting to set prices outside H-L range which
> >> is huge mistake).
> >>
> >> Pairs trading should always respect normal prices
> >> and you should use Foreign only for calculations
> >> and NEVER for setting actual trade price entry.
> >>
> >>
> >> Best regards,
> >> Tomasz Janeczko
> >> amibroker.com
> >> ----- Original Message -----
> >> From: "janhausd" <janhaus@>
> >> To: <amibroker@xxxxxxxxxxxxxxx>
> >> Sent: Friday, January 30, 2009 5:11 PM
> >> Subject: [amibroker] Re: PairTrading on Amibroker
> >>
> >>
> >> > I'm looking for the same thing, Angelo, I wish there was more
inbuilt
> >> > support in Ami for pair trading/testing :) The way I'm dealing
with
> >> > it for now is to utilize foreign() calls, which can be agonizingly
> >> > slow for large amounts of data, and test the strategy based on the
> >> > synthetic/pair, where you enter/exit based on the synthetic
price and
> >> > all statistics based on that. Also, It's very important to include
> >> > SetOption("priceBoundChecking",False);
> >> > SetOption("DisableRuinStop",True);
> >> >
> >> > Without disableruinstop, it seems anytime when there's enough
data to
> >> > enter/exit one leg but no data at the same time for the other
security
> >> > you hedge with, the backtester will kick you out of the
position with
> >> > some ridiculous price, and your results will be entirely incorrect.
> >> > Without priceboundchecking, you may not be able to generate the
> >> > synthetic pair value if the pricing is off. It took several
emails to
> >> > Ami support and browsing for posts here for me to figure out
these two
> >> > options were necessary for backtesting my setup, wish I'd known
> >> > earlier :) If you or anybody else has any better ideas, I'm all
up for
> >> > it...
> >> >
> >> > --- In amibroker@xxxxxxxxxxxxxxx, "ang_60" <ima_cons@> wrote:
> >> >>
> >> >> --- In amibroker@xxxxxxxxxxxxxxx, "janhausd" <janhaus@> wrote:
> >> >> >
> >> >> > Hi Angelo,
> >> >> >
> >> >> > I have in fact just recently contacted Herman regarding this
> > subject,
> >> >> > since running that code on my data resulted in mismatching
> >> >> > correlations, where Correl(A,B) was not equal to Correl(B,A)
due to
> >> >> > the Foreign() function and data holes between A and B. The
> > result is
> >> >> > actually somewhat similar to the the picture herman posted
in that
> >> >> > link, where you see that the correlation between AAPL,ALTR is
> > -0.624,
> >> >> > whereas ALTR,AAPL is 0.421, except when I ran the code, all
of the
> >> >> > pairs mismatched and not just the ones on the outer edge of the
> >> >> > correlation square. Anyway, if you have data without mismatching
> >> >> > times, this shouldn't be a problem :)
> >> >> >
> >> >>
> >> >>
> >> >> Thanks jan,
> >> >>
> >> >> this problem is clear to me now.
> >> >>
> >> >> I'm on my way to build a pair system on amibroker, using as a
> > template
> >> >> the code posted by TJ on this list some time ago.
> >> >>
> >> >> My code is pretty simple and open a position for symbol1, and -
> > at the
> >> >> same time - an opposite position for symbol2.
> >> >>
> >> >> Of course ,in the report this trade is counted as "two" and this
> > makes
> >> >> unuseful of all the statistics based on the total nauber of trades
> >> >> (e.g. percent winners... profit per trade... ).
> >> >>
> >> >> As anyone thought of a way of telling Amibroker that - in this
> >> >> particular case - the 2 trades representing both leg of the pair
> >> >> should be counted as one?
> >> >>
> >> >
> >> >
> >> >
> >> > ------------------------------------
> >> >
> >> > **** IMPORTANT ****
> >> > This group is for the discussion between users only.
> >> > This is *NOT* technical support channel.
> >> >
> >> > *********************
> >> > TO GET TECHNICAL SUPPORT from AmiBroker please send an e-mail
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> >> >
> >> >
> >>
> >
> >
> >
> > ------------------------------------
> >
> > **** IMPORTANT ****
> > This group is for the discussion between users only.
> > This is *NOT* technical support channel.
> >
> > *********************
> > TO GET TECHNICAL SUPPORT from AmiBroker please send an e-mail
directly to
> > SUPPORT {at} amibroker.com
> > *********************
> >
> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> > http://www.amibroker.com/devlog/
> >
> > For other support material please check also:
> > http://www.amibroker.com/support.html
> >
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> >
> >
> >
>
------------------------------------
**** IMPORTANT ****
This group is for the discussion between users only.
This is *NOT* technical support channel.
*********************
TO GET TECHNICAL SUPPORT from AmiBroker please send an e-mail directly to
SUPPORT {at} amibroker.com
*********************
For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
http://www.amibroker.com/devlog/
For other support material please check also:
http://www.amibroker.com/support.html
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