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Midway florida
Posts: 243 since May 2021
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The optimus example completely cherry picks a couple pairs trades with look ahead bias in order to make it appear that pairs trading with double the fees doubkencommissuons is as easy as well looking back at a chart historically and again cherry picking trades.
Nothing against optimus but has optimus show a losing trade in the russel am s dia likenwhen the russel moved 80 points in 1 day and the dow didnt even move! Just as pays may converge you can get murdered when they both go opposite directions. You are losing twice. Now I dont work for the nfa or the CFTC but as a broker ethically you should be balanced and show how you can also lose in pairs trading as most do!!
You cant just slap a risk disclosure on on profitable trade examples and expect that to pass the test of a balanced risk a reward type of trade from a broker.
Again. Every single error you make in outright trading will follow you to pairs trading and most unsuccessful traders turn to pairs as their last resort at trying to make money in trading. You still have to know when to enter and when to exit. Reduced margins mean you will do more until like long term capital management you bkow out when the russel tanks and the es rallies or vice versa.
My point here is that pairs trading is full of risks and your slippage can be extreme along with fees and commissions. I thought the paper was decent but how about throwing a trade up right now..look at your correlations right now ootimusvand tell us which one to buy and which one to sell. Or add a losing trade to the example.
All too often I see unbalanced trade examples with hindsight that can lead the sheep to the wolves ! Anyway nice paper but balanced would be better.
ok ok im done ranting about pairs trades!! sorry just understand that correlations like stock prices and the weather change on a dime sometimes and you must maintain exiting loser and holding winners.. thats all basic strategy is a must
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