Experiment In Statistical Arbitrage

[jatotek]

Statistical Arbitrage is just a form of hedging its not to complex but at the same time it seems to have a lot of mystery around it. So here is a lil log ill keep to help anyone else that might be working with similar systems.

I will do my best to update trades but trades typically take weeks to close. So if this seems to be moving slow that would be why. Note the trades in this log are with my live money on my experimental mini account. I am not making any trade recommendations. As this is strictly a experiment on low frequency arbitrage positions. Live money is key for the experiment to better evaluate personal psychology while trades play out.


Trading pairs
Short
EUR/AUD @ 1.9538
Lot Size: 1
Long
EUR/USD 1.3775
Lot Size: 1.4
Other notes:
Opening Divergence: 3,000 pips
Target: 2,000 pips
Average Down: Cumulative at -1,000 Approximately 5%

[jatotek]

Originally Posted by jatotek

Statistical Arbitrage is just a form of hedging its not to complex but at the same time it seems to have a lot of mystery around it. So here is a lil log ill keep to help anyone else that might be working with similar systems.

I will do my best to update trades but trades typically take weeks to close. So if this seems to be moving slow that would be why. Note the trades in this log are with my live money on my experimental mini account. I am not making any trade recommendations. As this is strictly a experiment on low frequency arbitrage positions. Live money is key for the experiment to better evaluate personal psychology while trades play out.


Trading pairs
Short
EUR/AUD @ 1.9538
Lot Size: 1
Long
EUR/USD 1.3775
Lot Size: 1.4
Other notes:
Opening Divergence: 3,000 pips
Target: 2,000 pips
Average Down: Cumulative at -1,000 Approximately 5%

Average Down First Positions
EUR/AUD Short 2.0418
EUR/USD long 1.3605

[jatotek]

Originally Posted by jatotek

Average Down First Positions
EUR/AUD Short 2.0418
EUR/USD long 1.3605

Ok after a lil panic on friday and coming very close to having to average down again it seems everything is now comming up roses. I Just woke up to find things have moved favorabley.

Next step
Close the first set of opened positions
Short
EUR/AUD opened @ 1.9538
Closed @ 1.9329
Long
EUR/USD opened @ 1.3775
Closed @ 1.3660

Due to lot sizing even though I closed about 200 pips here. I took a small loss. Had the positions closed 5 min earlier 50 more pips would have been closed. This exit was one of 3 that I could have taken. The main function of averaging down the positions is to get in at a better place to close more profit on final closure. Closing the original positions at near break even was not quite what I was expecting. Originally I planed on closing all positions when the averaged down positions and the first positions came to break even just to reenter.

Because of the wild move while I was asleep I was able to manage a better exit. Now im holding the averaged down positions with a lil over 1,000 pips to the positive side. Roughly 5%. If need be ill average down again as the chart event that dictates my exit is not gonna happen any time soon.

If things go well i could be sitting on this for another few weeks. It was off to a wild start and although this is a bit of a countertrend method im remotely comfortable trading this method. Had you asked me friday I would have had a lil fear. EUR/AUD had a huge push and that had me feeling that the market had become unhinged. The large swing I allow before adding to positions helped quite a bit. Perhaps in time ill have it all worked out. There are still a few things I need to work out. That said i think its comming along well.


Current Open Positions
EUR/AUD Short 2.0418
+1138 pips
EUR/USD long 1.3605
+11 pips

[jatotek]

Originally Posted by jatotek

Current Open Positions
EUR/AUD Short 2.0418
+1138 pips
EUR/USD long 1.3605
+11 pips

Something is drastically wrong with my lot sizing...
Close EUR/AUD short @ 1.9225 Pips +1193
Close EUR/USD long @ 1.2833 Pips -772
Total pip gain +421 %gain -1 ish

mental note: after being up 31 hours its time to get some sleep. Perhaps I need to rework the thought on pip value and pull it to equal rate per pip movement and let the pips do the walking. pips are there so no need to flake out and try to get fancy with volatility.

[jatotek]

New trade
Actual trade was entered friday i just forgot to enter it on here. Lot sizing accordint to the pip calculator I used claimed that both positions should have the same pip to dollar value. Lets see how it goes.

Trading pairs
Short
EUR/CHF @ 1.5103
Lot Size: 1

Long
GBP/CHF 1.7556
Lot Size: 1
Other notes:
Opening Divergence: 1,500 pips
Target: 1,000 pips
Average Down: Cumulative at -1,000 Approximately 5%

[jatotek]

Originally Posted by jatotek

New trade
Actual trade was entered friday i just forgot to enter it on here. Lot sizing accordint to the pip calculator I used claimed that both positions should have the same pip to dollar value. Lets see how it goes.

Trading pairs
Short
EUR/CHF @ 1.5103
Lot Size: 1

Long
GBP/CHF 1.7556
Lot Size: 1
Other notes:
Opening Divergence: 1,500 pips
Target: 1,000 pips
Average Down: Cumulative at -1,000 Approximately 5%