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Questions & Answers / Re: Margin call
« Last post by Matthew Macklin on March 17, 2019, 05:18:27 pm »Thank you for the reply Karel! Clarification much appreciated
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Questions & Answers / Re: Margin call
« Last post by admin on March 12, 2019, 09:59:23 am »Hi Matthew,
you can get more information about risk control mechanisms in pairs trading here: https://www.pairtradinglab.com/faq#pairs-trading-risk-control
The rationale behind not supporting the conventional stop loss is explained there as well...
About your backtester question - the backtester is rather simple and does not really simulate margin calls - the reason is that you would require tick-by-tick backtester in order to simulate margin calls properly. With EOD mode you simply can't.
The general idea is to diversify - your portfolio of strategies should grow with your leverage. If you trade CFDs (10% leverage) and you want to use your capital as much as possible, you should trade at least 50(!) pairs at the same time.
Kind regards,
Karel
you can get more information about risk control mechanisms in pairs trading here: https://www.pairtradinglab.com/faq#pairs-trading-risk-control
The rationale behind not supporting the conventional stop loss is explained there as well...
About your backtester question - the backtester is rather simple and does not really simulate margin calls - the reason is that you would require tick-by-tick backtester in order to simulate margin calls properly. With EOD mode you simply can't.
The general idea is to diversify - your portfolio of strategies should grow with your leverage. If you trade CFDs (10% leverage) and you want to use your capital as much as possible, you should trade at least 50(!) pairs at the same time.
Kind regards,
Karel
3
Questions & Answers / Margin call
« Last post by Matthew Macklin on March 07, 2019, 11:16:47 am »Hello!
First thanks for creating this fantastic tool! I am very excited to start live trading. I just have a question that may or not be stupid, if so please forgive me.
I understand that the backtest and live PTL trader do not support stop loss, only time-limit stop loss. I understand the rationale for this, but how does the backtester simulate a situation in the case of being margin-called? For example if you are required 50% margin, but one leg of your pair moves against you by 50%, presumably the exchange will margin call you? And if you do not wish or are not able to add more margin, you must close the position...
I know that due to regulations, IB only allows 50% margin for most markets now, but I guess this must be even more pronounced in a market where it allows only 15% margin? For example if I had $10k at the recommended 5 slots, each at 15% margin, I could quickly find myself in debt if I was unlucky.
Is this simulated in the backtest, and/or is there a mechanism to deal with this in live trading?
Or am I just missing something obvious? Apologies if so.
Thanks!
First thanks for creating this fantastic tool! I am very excited to start live trading. I just have a question that may or not be stupid, if so please forgive me.
I understand that the backtest and live PTL trader do not support stop loss, only time-limit stop loss. I understand the rationale for this, but how does the backtester simulate a situation in the case of being margin-called? For example if you are required 50% margin, but one leg of your pair moves against you by 50%, presumably the exchange will margin call you? And if you do not wish or are not able to add more margin, you must close the position...
I know that due to regulations, IB only allows 50% margin for most markets now, but I guess this must be even more pronounced in a market where it allows only 15% margin? For example if I had $10k at the recommended 5 slots, each at 15% margin, I could quickly find myself in debt if I was unlucky.
Is this simulated in the backtest, and/or is there a mechanism to deal with this in live trading?
Or am I just missing something obvious? Apologies if so.
Thanks!
4
Trading Results / Re: Anybody else noticed the change in market dynamics during the past month or so?
« Last post by Ray Zhung on March 03, 2019, 10:46:35 pm »Any updates guys? 2018 was a good test for most tradings pairs. Any input or tweaks? Trading pairs on the same sectors doesnt help in term of diversification IMO.
You mean you have your own preset trading universe where most pairs tested good during 2018? If so good for you, I witnessed the opposite where more than half of my pairs disintegrated; or did you filter out some good pairs from the database that tested good during 2018? Well, that's why they got filtered out. In any event, you really can't assess a pair's true profitability until you go live (you can guesstimate).
My own tweaks so far are only applicable if you're using the ratio model: you can only go with the pairs that most of their lookback periods are profitable to trade so that you can minimize out-of-sample risk; secondly you have to constantly add in new pairs and flush out disintegrated pairs, keep your trading universe fluid and dynamic. Don't fall in love with any pair not matter how nearly identical the 2 companies are fundamentally.
If you're doing dollar neutral hedging for each pair I don't think diversification even matter that much. You can have a entire portfolio in the same sector and have lower volatility than having a diversified portfolio with different sectors but some pairs getting way out of whack and causing big losses. Diversification is mostly meant for directional bet which is the opposite of pair trading.
Just a couple of my own nuggets, hopefully more people can share theirs.
Cheers and happy trading.
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Trading Results / Re: Anybody else noticed the change in market dynamics during the past month or so?
« Last post by Nao Tai on February 18, 2019, 08:04:20 am »Any updates guys? 2018 was a good test for most tradings pairs. Any input or tweaks? Trading pairs on the same sectors doesnt help in term of diversification IMO.
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Questions & Answers / Re: No database update?
« Last post by admin on October 04, 2018, 03:25:02 am »Ready.
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Questions & Answers / Re: No database update?
« Last post by Ray Zhung on October 03, 2018, 08:07:52 pm »Got you. I understand it will take a long time. Just wondering if it's happening. Thank you for the info.
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Questions & Answers / Re: No database update?
« Last post by admin on October 03, 2018, 05:18:08 pm »You are right, but calculating the database takes few days on a state-of-the art hardware. At 95% now, still few hours remaining...
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Questions & Answers / No database update?
« Last post by Ray Zhung on October 03, 2018, 05:10:08 pm »Isn't it supposed to be updated every 3 months?
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Questions & Answers / IB live demo binding
« Last post by Juan Restrepo on September 25, 2018, 09:50:23 am »Hi,
I would like to know if its possible to bind a live IB demo account to the PTL trader platform.
Thanks
I would like to know if its possible to bind a live IB demo account to the PTL trader platform.
Thanks