AS far as i can tell, they are not really in a "neutral price position" since the trade was entered - I think they have both moved unfavourably.
Well, GNS has pretty much remained around a cent or two of entry price but the morning of my post ABC was back at 2.36 after hitting 2.47 the previous day (and then up to 2.52 yesterday).
My question of PT was that as they had diverged even more from the initial trigger point, was this not a typical example of when he might average down, with ABC in this case, and indeed then pick up some small profits along the way before final exit?
thanks skc, thats what i was after. I had heard there isn't much liquidity with asx cfds.
two more for you:
- if you use ib for the long leg, what do you use for the short leg?
- does ib only offer 50% on overnight positions? (i have looked on the ib site for margin rates on aus stocks but can't say i came away with a definitive answer..)
hadn't really thought about mixing platforms ie mqprime cfds for shorts, ib for longs.
Since I work full-time, i cannot use the pairtrade software during the day and have been experimenting with using EOD data to find suitable pairs and then attempting to get a similiar or better price the next morning. Sometimes this results in missed trades, sometimes it also helps avoid extreme price changes. An example of a trade that presented itself at close yesterday was "short FLT@11.80, long TEN@1.30". While TEN has remained steady, FLT has rocketed to 13.56! In the opinion of those who have been doing this longer than I, does this now make it an even more appealing trade, or is this 15% movement an indication that they should no longer be used as a pair? (looking at the graphs from yesterday correltation is very high, with reasonable looking % from mean and spread charts - spread trending, % from mean oscillating).
Since I work full-time, i cannot use the pairtrade software during the day and have been experimenting with using EOD data to find suitable pairs and then attempting to get a similiar or better price the next morning. Sometimes this results in missed trades, sometimes it also helps avoid extreme price changes. An example of a trade that presented itself at close yesterday was "short FLT@11.80, long TEN@1.30". While TEN has remained steady, FLT has rocketed to 13.56! In the opinion of those who have been doing this longer than I, does this now make it an even more appealing trade, or is this 15% movement an indication that they should no longer be used as a pair? (looking at the graphs from yesterday correltation is very high, with reasonable looking % from mean and spread charts - spread trending, % from mean oscillating).
The market bounced hard of its march lows by the leak of memo that citigroup would be announcing a profitable quarter for the first time in awhile, shorts immediately starting covering and the market has since sucked in new gullible buyers on the premise of a ''economic recovery'' just the same mentality in 1930. Look for a big bank announcing bad news in tandem with a 2%+ down day on big volume for a trend reversal.
lol? do you watch the market 16hrs a day?
It was exactly the rumour of citi/banking sector returning to profitability and stabilizing in March that induced the short covering, plus a myriad of indicators support this theory that this run up has more to do with short covering than fresh buying, the nominal increase in the stock market value hasn't matched the outflow from money/bond/paper funds, nowhere near it. Also with unemployment set to rise for the next 2 years at least, plus savings rate going from -9% to +7% where do you think new corporate earnings are going to come from? the whole world is still de-leveraging and since consumption is correlated to profits the risk is on the downside. The market has priced in a recovery and anything less is going to disappoint. I could go on and on all day about this with supporting data, but this is a pair trading journal, not a economic debating journal, if you don't see clouds on the horizon I guess your looking through a different lens than me which is fine, that's what makes a market, buyers and sellers.
''Whenever you find yourself on the side of the majority, it's time to pause and reflect.'' Mark Twain.
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