The financial crisis has become a good test for the correlation and cointegration of pairs. For example, pairs like V*200-MA*100, AMLP*700-XOM*100, retained their character behavior and did not fall apart.
V*200-MA*100
Pairs for March 2020
XEL*300-AEP*200. Correlation 0.87, p-value 0.03. Cointegrated.
VSA – analysis on february 2020
In CMCSA 02/21/20 I bought put options with 42.5 strike. The general mood is to drop the market due to the situation with coronavirus. In the CMCSA, on the weekly chart there was an aptrust signal (false breakdown) and a test of this aptrast on low volumes.
Pairs for february 2020
SPY*100-XLK*200. Correlation 92, p-value 0.63. Not cointegrated.
FAS*300-SPY*200. Correlation 93, p-value 0.28. Not cointegrated.
Pairs for january 2020
SPY*100-XLF*1000. Correlation 0.86, p-value 0.01.
C*100-USB*200. Correlation 0.78, p-value 0.01.
The strategy of statistical arbitrage on the US stock market
This article is aimed on those who haven’t been familiar with the strategy of statistical arbitrage, pair trading, but would like to try this trading strategy in practice. I focused especially on the practice. In this article, I’ll give you all the tools you need so that you can quickly set up free and open source software, start trading, quickly evaluate a strategy, and decide whether it suits you or not. According to the theory of statistical arbitration, there are a lot of free access materials, and as long as you understand correlations, cointegration, stationary time series, highly specialized software, enthusiasm may disappear. I would not like your interest to disappear, because strategy is very interesting, especially in terms of stability of positive transactions execution.
First of all, I would like to say about the disadvantages of the pair trading strategy. This strategy requires significantly more capital than trading a single instrument. You need to open a position in long on one stock and in short on another stock, and with a different volume on each side. To diversify risk, you need to open positions in several pairs. Next, you need a broker who provides the opportunity to trade fractional lots so that you can set the exact ratio of the volume in the pair. Even fewer brokers can provide large shoulders (4th, 5th leverage) to transfer positions to the next day.
Working patterns for day trading on the US stock market
In this article, I would like to tell about several patterns for intra-day trading on the US stock market. These patterns worked and continue to work today. I would like to emphasize at once that the patterns discussed below work well in the stock market, not in the commodity futures or currencies market. The nature of the movements inside the day in the futures market, in my experience, is quite different. For those who are just starting to learn trading and who want to try themselves in intraday trading, I would advise the American stock market. It has a large number of tools, and every day there you can find papers with simple and understandable movements. Take one, two patterns maximum, the nature of which you understand, and look only for them. So, let’s move on to the patterns.
1. Pattern “first pullback at 10 o’clock”
This is my most favorite pattern, which always brought money. I had periods when, trading only it, I did not have any unprofitable trades within a month (doing daily 1-3 trades).
This pattern involves the search for active shares in which the trend movement begins or continues. In accordance with this model, in the first 30 minutes after opening of the market, the stock makes the first move at least for 3-4%. Further, at 10:00 – 10:30 we are waiting for the pullback, the formation of support and go from support in the direction of the trend, joining a strong player. We set the stop for the pullback. Trade of trends is the simplest and most reliable transaction.
Share of Intelsat S.A. (I) 13.07.2018 after the first pullback at 10:10 is fixed over a round number – a level of $ 20:
Trading strategy Pump and Dump
1. What is Pump and Dump
Pump and dump trading strategy consists in the search of shares or other exchange instruments whose prices have been broken up by news, rumors, highly exaggerated or false statements and other manipulations. Often high prices, for example, shares, are the result of PR companies, they are not proved and do not have a foundation in the form of financial companies’ results.
We can look for a point to open long positions in the initial stages of the pump, monitoring the news background of the company, or to open short positions, when a strong upward movement stops. Tracking the news background around the company, you can buy shares when the pumping is just beginning, or shorten shares after a strong pumping, when the growth is 50, 100% or more, and it becomes obvious that the growth is groundless. In this case, we expect to take 30-50% of this growth on the fall.
Often the strategy of trading, pump and dump means opening of short positions, when an imbalance arises in a strongly increased stock after sharp vertical movements. The pumping organizers sell the shares to the crowd on growth, and when the interest of the crowd to buy at high prices disappears, prices start to fall off and return to the point from which growth began and even fall below.
Lately, among large-scale pumps and dumps, I can name pumping of crypto-currencies. At the end of 2017, everyone was talking about bitcoin, anyone who will take the trouble. It was possible to observe a powerful PR company before trading in futures for this instrument. In a variety of publications, it was claimed that bitcoin would cost 100,000, one million dollars. At the same time, crypto-currencies did not have any specific legal status in many countries. It is also not clear how to conduct a fundamental analysis of the crypto currency.
Often, under the guise of a fundamental analysis, one can see a ridiculous analysis of rumors on Twitter, when owners of a certain crypto currency feed the public with “news of the future”. In general, there are many signs of pumps and dumps in crypto-currencies, and the behavior of the price of the same bitcoin, crypto tokens confirms this. In the article, we will consider pumps and dumps in US stocks.
Anton Kreil. Hedge strategies based on fundamental analysis
Anton Kreil is famous for his TV show on BBC “Million Dollar Trader”, earlier he worked as trader at Goldman Sachs, now he is partner at Institute of Trading and Portfolio Management.
1. Description of course and trade approach
The course of trading held by Anton Kreil, is based on macroeconomic, fundamental, technical analysis and risk management. His approach to trading copies hedge fund strategies. Moreover, not only the trading strategy is copied, but also the strategy of the traders’ behavior. The strategy of the hedge fund traders’ behavior is that they get their monthly income at the expense of wages, and not from trading. Salary is in the form of a percentage of the management of the attracted capital. They reinvest half of the incentive bonus from the profits again to the fund. In this way, hedge fund traders increase their capital, and at the expense of interest capitalization they will eventually earn much more after the sale of the fund than if they simply withdrew their earnings each month. To make a fortune, you need to imitate the hedge fund managers, and not listen to advertising, in which you will be told that you will earn a certain amount every day from trading. When you withdraw money, you will not increase your capital. Course begins from this.
The trading strategy taught in this course also repeats hedge fund strategies. The goal is a stable profit and moderate volatility of the account when you earn both in a good and a bad market. In the course of trading, you are taught to create diversified portfolios of long and short transactions with the time of holding spread positions during 1-3 months. The focus on medium-term trade is made for the reason that over the past decades the volatility of markets has steadily declined. The statistics on the indices, shares, including into the index, currencies, shows that 80% of the time the market is asleep.
Day trading course review by SMB Capital
1.Course description
The trading course by SMB Capital is focused on intraday trading in the US stock market. The day-trading strategy is based on the analysis and selection of active shares, technical analysis, tape reading and risk management. If you are trading other markets, then still in this course you will be able to find useful advice on technical analysis, position management, risk. The article will describe trading strategy, basic models and trading tools.
Courses by SMB Capital will, of course, give more knowledge and skills. They involve communicating with successful traders, analyzing your trade, using specialized software from SMB, etc. But the courses are worth attending when you are sure that you want to trade exactly at this market and in this style. The article shows an effective strategy, trying which, you will be able to understand whether the US stock market and this intraday trading style are suitable for you.
2. Selection of active stocks
The search and selection of active stocks (or, as they are called in SMB, “stocks in play”) – this is the basis which the strategy is built on. The quality of your trading will depend very much on the quality of the stocks you have selected. Trade in such stocks offers several advantages:
– “stocks in play” can make strong unidirectional movements and form clear formations;
– the price movement in such stocks is cleaner, with less “noise” due to the presence of large players and less influence of robots;