Comments on: Pairs Trading http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/ Strategy Programming for Automatic Trading Wed, 07 Jan 2009 01:06:44 +0000 http://wordpress.org/?v=2.2 By: Trader http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-6 Trader Wed, 12 Sep 2007 07:52:30 +0000 http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-6 Thanks for this very interesting article. It casts good light on pairs trading. If have read it several times over, and also applied it to a trading system on a paper account. However, I agree to the point made by Zane. When you are trading GBPUSD against EURUSD, you are effectively trading EURGBP. This is especially true if you trade a dollar neutral strategy. And then you are no longer market neutral. You could of course argue that the rate of GBPUSD vs. EURUSD is trading around an equilibrium and history shows that you are mainly correct, but that would be a different discussion. Thanks againg. Very useful info indeed. Thanks for this very interesting article. It casts good light on pairs trading.
If have read it several times over, and also applied it to a trading system on a paper account.

However, I agree to the point made by Zane. When you are trading GBPUSD against EURUSD, you are effectively trading EURGBP. This is especially true if you trade a dollar neutral strategy. And then you are no longer market neutral. You could of course argue that the rate of GBPUSD vs. EURUSD is trading around an equilibrium and history shows that you are mainly correct, but that would be a different discussion.

Thanks againg. Very useful info indeed.

]]> By: Zane http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-5 Zane Wed, 15 Aug 2007 04:15:51 +0000 http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-5 Interesting strategies! Regarding your statistical arbitrage tradings, for example, long eur/usd while short usd/chf at the same time, I think you are making a directional bet rather than using a market neutral strategy (which you would intend to do for a stat arb), since eur/usd and usd/chf are NEGATIVELY correlated. Basically, for this trade, assuming eur/chf is nearly flat, you are betting usd will depreciate with respect to eur and chf, so this is a directional bet. I have yet to see a working statistical arbitrage strategy with just two currency pairs. Interesting strategies!

Regarding your statistical arbitrage tradings, for example, long eur/usd while short usd/chf at the same time, I think you are making a directional bet rather than using a market neutral strategy (which you would intend to do for a stat arb), since eur/usd and usd/chf are NEGATIVELY correlated. Basically, for this trade, assuming eur/chf is nearly flat, you are betting usd will depreciate with respect to eur and chf, so this is a directional bet.

I have yet to see a working statistical arbitrage strategy with just two currency pairs.

]]> By: steph http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-4 steph Tue, 19 Jun 2007 13:36:05 +0000 http://forex.thedaintyarchstudio.com/2007/06/07/pairs-trading/#comment-4 <p>very interesting !<br /> it is new for me, i work on other strategies (martingale, trend, counter-trend) and i found here new ideas !! thanks<br /> is it possible to have yours ea's to work on it ?<br /> i found you on mybloglog, you are now one of my contacts</p> <p>i will be pleased to work with you</p> very interesting !
it is new for me, i work on other strategies (martingale, trend, counter-trend) and i found here new ideas !! thanks
is it possible to have yours ea’s to work on it ?
i found you on mybloglog, you are now one of my contacts

i will be pleased to work with you

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