Pair trading and multicurrency arbitrage. The showdown. - page 301

 

Given the varying volatility of the instruments, it is, of course, incorrect to always close positions at the same number of pips. In that case, different profit figures in cash would need to be calculated for different combinations...

It is also advisable to include the condition ‘close all positions when the instruments cross’ in the code for the spread strategy.

 
Sergey2134 #:

Given the varying volatility of the instruments, it is, of course, incorrect to always close positions at the same number of pips. In that case, different profit figures in cash would need to be calculated for different combinations...

It is also advisable to include the condition ‘close all positions when the instruments cross’ in the code for the spread strategy.

The profit per 0.1 lot for each pair is $10; well, that’s been verified, so to speak.

If 0.2 lots = $20

--

The panel immediately recalculates the lot size for the neighbouring pair; there’s no need to calculate it manually.

 
Vitaly Muzichenko #:

The panel automatically recalculates the lot size for the adjacent pair; there is no need to calculate it manually.

If I set Take Profit to $20, will the lot size be recalculated as well? Well, if so, that’s great.

And a separate option to ‘close all positions on instrument crossover’.

 
Sergey2134 #:

If I set the take profit to $20, will the lot size be recalculated as well? Well, if so, that’s great.

And a separate option to ‘close all positions on instrument crossover’.

No, that’s not how it works; the lot size for neighbouring pairs is recalculated


I uploaded it yesterday; give it a go

 

I’ve downloaded it. It works perfectly. Let’s say I want to increase the lot size so that the take on two instruments totals $20.

First of all, I enter the figure 20 next to the ‘Close’ button. How do I then correctly determine the lot size?

 
Sergey2134 #:

I’ve downloaded it. It works perfectly. Let’s say I want to increase the lot size so that the take on two instruments totals $20.

First of all, I enter the number 20 next to the ‘Close’ button. How do I then correctly determine the lot size?

You choose the take-profit level yourself; if you see that the entry isn’t quite right, you can reduce the take-profit, or conversely, increase it if the indicators show a trend towards continuation.

The take-profit is not linked to lot sizes; they are all separate.

 
Sergey2134 #:

I’ve downloaded it. It works perfectly. Let’s say I want to increase the lot size so that the take on two instruments totals $20.

First of all, I enter the number 20 next to the ‘Close’ button. How do I then correctly determine the lot size?

For every 0.1 lot, I use $10

In the screenshot, the lot size is 0.15, so the take profit is $15


 
Thank you. I’ve sorted it out. In your correlation table, the pairs are sorted by percentage spread. Would it be possible to sort them so that only those highlighted in green and marked with plus signs appear at the top? In other words, so that the more stable pairs appear at the top.
 
Sergey2134 #:
Thank you. I’ve sorted it out. In your correlation table, the pairs are sorted by the percentage of divergence. Would it be possible to sort them so that only those highlighted in green and marked with plus signs appear at the top? In other words, so that the more stable pairs appear at the top.

++++ = pairs move in tandem

---- = also move together, but in the opposite direction

Correlation strength scale

Condition (checked from top to bottom) Result Meaning
r > 0.7 +0.854 ++++ Very strong positive
r > 0.5 +0.621 +++ Strong positive
r > 0.3 +0.412 ++ Moderately positive
r > 0.1 +0.154 + Weak positive
r > -0.1 -0.023 ~ Neutral (almost zero)
r > -0.3 -0.187 - Weakly negative
r > -0.5 -0.392 -- Moderately negative
r > -0.7 -0.612 --- Strong negative
otherwise -0.874 ---- Very strong negative


---- = the same together, but mirrored

If you see ---

then press the button and flip the second pair; you’ll see how they move


 
The calculation of ++++ and ---- is based on correlation; if the pairs do not match at any point, the calculation may be incorrect – this applies if + and -, or ++ and --, do not match. Please double-check this visually by swapping the second pair.