Making money on forex is impossible - page 54
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Hedge on one pair - how is that? And on a triangle or similar force majeure will hit asymmetrically.
Who said one pair? Loki's bullshit...
who said one at a time? loki's a total crap...
Why do you think that if the lock is not on one pair, the force majeure will hit symmetrically used ones? It will just break the symmetry and wipe out the deposit.
That's true, but not quite so. (no locs by the way, I wrote about it above)
and I see no solution and no answer to the question you asked - why?
think for yourself.
this is the job - to find answers to such right questions.
If you write everything down here - who would trade your profits on forex?
That's true, but not quite so. (no locs by the way, I wrote about it above)
and I see no solution and no answer to the question you asked - why?
think for yourself.
this is the job - to find answers to such right questions.
if you describe everything here - who would trade your profits in forex?
If you have to explain everything here, then who do you trade your profits with? Because these guys love to average, when the delta goes against them, at one point in time a margin call (or ruin stop) comes and the whole not-so-sour saiz is poured into the market. Thereby tearing up the delta even more. This happened for example in 2007 in the USA during the mortgage crisis, it buried a lot of paired traders. The press mentioned 25 sigma events, i.e. the delta diverged by 25 standard deviations!
The biggest fear of Pair Traders is asset misalignment. Because these guys really like to average, when the delta goes against them, at one point in time a margin call (or ruin stop) comes in and the whole not-so-subtle saiz is poured into the market. Thereby tearing up the delta even more. This happened for example in 2007 in the USA during the mortgage crisis, it buried a lot of paired traders. The press mentioned a 25 sigma event, i.e. the delta diverged by 25 standard deviations!
Of course it's a bit of a loss. Of course, you can't be without a loss at all.
I mean, how's that? There's no slump in the system. You're not making any sense.
What's your problem? I'll tell you right now.
The biggest fear of Pair Traders is the asset misalignment. Because these guys love to average, when the delta goes against them, at one point in time a margin call (or ruin stop) comes in and the entire not-so-sour saiz is poured into the market. Thereby tearing up the delta even more. This happened for example in 2007 in the USA during the mortgage crisis, it buried a lot of paired traders. The press mentioned 25 sigma events, i.e. the delta diverged by 25 standard deviations!
No need to quote without understanding. Correlation for pairs trading is not important at all.
Another obvious error in the same source is not understanding the difference between beta neutrality and self-financing. Moreover, both are called market neutrality and the first approach is proposed to be implemented by the methods of the second. This is p@#$%^ in general.
Further - 2007 was a bad year, not because of rascorrelations, but because of similar risk models and consequently the same residual risks (which made themselves felt).
p.s. "Averaging" in portfolio models may not increase risk, but rather reduce it. Also, it is limited and has a pretty good rationale.
No need to quote without understanding. Correlation for pairs trading is not important at all.
Why isn't it important?
Because pair trading can be profitable with any cross-correlation. If, of course, you calculate it correctly (a lot of discussions on the forum about the right way of calculation.)
Spread volatility, yes, will be important. And it depends on the cross-correlation (correctly calculated). But a strategy with zero volatility does not become unprofitable, it just stops earning (which is not the same as starting to lose on "cross-correlation").