[Lucid]

Ok let me give you some of the trades that took this last week. Right now the EUR and the GBP are correlating quite well. Now here is how the set up works. This last week we put in a Long EUR/USD and a Short GBP/USD at the same time. When the markets are choppy and in a range then you will get swings in and out of profits when you swing into profits which might take 24 hours or it might take 2 minutes then you close out the trades and wait for another opportunity. We will sometimes take 20 of these a day or we might only take one. I will try and learn how to attach some of the actual trades to show it in real time.

[Kiwi]

I think that brownsfan might just have another one nailed to the floor.

The correlation is between suckers who might be exploited and junior members of trading boards (sorry to those who are 1:1 on this).

The great returns are to another spammer selling managed accounts and forex training courses.

Lucid of course means "characterized by clear perception or understanding" which is what Brownsfan and I are displaying for all to see. We are your shining light.

[natedredd10]

Originally Posted by Lucid »

So far our correlation strategies have brought our forex managed account great returns and ]I am so surprised that more people do not discuss and use this method of trading

Its really not that hard to figure out why a trading board that is made up of guys not swinging 50 mil+ are not so interested in pairs/long-short/stat arb strategies...
Beyond the idea that correlations between 2 instruments are ludicrously unstable on a short enough time frame to not be looking at obvious sector and index beta, this whole idea was milked in the 90s then become a way to market to rich morons who wanted some money with "quants" during the credit bubble.
I guess the retail shysters have finally read some Taleb and figured out after the credit crisis this is good marketing to reference "randomness" and "correlation"...
While I totally agree with your stochastic easement of markets as a whole. Personally, I have zero interest in pairs trading(let alone stat arb) because it doubles my capital commitment while cutting off any positive return from tail risk and just being "lucky"..I eat the risk of being massively wrong, but have hedged myself of being massively right.
Of course though you are in managed forex accounts, and not currency futures..no surprise at all...

[TheDude]

Originally Posted by Lucid »

Ok let me give you some of the trades that took this last week. Right now the EUR and the GBP are correlating quite well. Now here is how the set up works. This last week we put in a Long EUR/USD and a Short GBP/USD at the same time. When the markets are choppy and in a range then you will get swings in and out of profits when you swing into profits which might take 24 hours or it might take 2 minutes then you close out the trades and wait for another opportunity. We will sometimes take 20 of these a day or we might only take one. I will try and learn how to attach some of the actual trades to show it in real time.

Hi Lucid,

I'm interested to hear what you have to say - I'll keep an open mind, so thanks for your input.

One question I have about this trade. Correct me if/where I'm wrong, your structure/position will be as follows:
+EUR, -USD
- GBP +USD
As I see it, your USD position is in fact flat, and what you actually have is long EUR/GBP. I fail to see where correlation comes in to this.

If YEN/USD had no correlation to GBP/USD and I did the same, I'd have a YEN/GBP position.

Sorry if I'm being stupid, I just dont see where correlation comes into play.

[MidKnight]

Originally Posted by Lucid »

Ok let me give you some of the trades that took this last week. Right now the EUR and the GBP are correlating quite well. Now here is how the set up works. This last week we put in a Long EUR/USD and a Short GBP/USD at the same time. When the markets are choppy and in a range then you will get swings in and out of profits when you swing into profits which might take 24 hours or it might take 2 minutes then you close out the trades and wait for another opportunity. We will sometimes take 20 of these a day or we might only take one. I will try and learn how to attach some of the actual trades to show it in real time.

So basically you are just trading the cross rate (EUR/GBP) long or short....I'm still at a loss on exactly what you are doing because you make it sound more complicated then that....

With kind regards,
MK

[bampairtrading]

pair trading with currencies are typically an interest rate instrument, such as pairing the euro vs the eurex bond, or one of the majors versus the dollar index.

there are many ways to trading pairs, and one need not trade both instruments. we've had success using the ES as the trading instrument paired against the VIX for example.

[bampairtrading]

in FX, the second symbol is typically an interest rate instrument, such as the trading the Euro based on the Eurex Bond. Sometimes the dollar index is used.

One need not trade both sides, which is called unilateral pair trading by some. For example, we've had success pairing the ES with the VIX, trading just the former.

Full disclosure : we offer a pair trading testing strategy for Tradestation, but it's not a signal service and mean to serve as a framework for people to test their pair ideas.