Author Topic: Pair trading beginner  (Read 33 times)

Seng Ng

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Pair trading beginner
« on: June 16, 2020, 06:51:27 am »
Dear All, I am very new to pair trading and have read some information about pair trading. I just would like to understand better about pair tradings?
1. What are the annual return which can be expected?
2. If there is a draw down, how long is the drawn down last?
In this paper, it shows that pair tradings has decayed to the point that from 2003 onwards, it is not profitable. New pairs are always needed to remain some profitability.
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.547.8922&rep=rep1&type=pdf
3. What is holding period for a pair, example 5 days? Can PTL do intraday trading?

Thank you so much as i have so much to learn.



Hung-Wah Cheung

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Re: Pair trading beginner
« Reply #1 on: June 17, 2020, 07:40:01 pm »
Hi,
First reply to a post myself.
1 - I would agree with the article that if you can get 1% a month then you'll be doing very well.
2 - How long is a piece of string? That's a very difficult question to answer. From my experience it could be anywhere from 3 to 6 months depending upon a variety of factors. Profitablility has declined but there are still pockets where you can attempt to extract some performance. Look for places where there are capacity constraints for larger players. You will always need to look for new pairs as the relationship of the pairs will deteriorate over time.
3 - That depends upon your input parameters. Are you using daily, weekly closes etc. I don't do intraday mean reversion.

Thank you

Seng Ng

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Re: Pair trading beginner
« Reply #2 on: June 19, 2020, 04:27:00 am »
Thank you so much for the help. Even with 1% returns per month. The return is very good. I am reading more around before to decide if I want to sign up PTL. I saw that there a lots of filter in the pair search in PTL site which i am not sure how to use too! If I can get around 1% return per mth, I will be very happy to sign up.