Daytrading Stock Pairs

Save this PDF as:

Size: px
Start display at page:

Download "Daytrading Stock Pairs"

Transcription

1 TRADING TECHNIQUES Using Volatility And Correlation Daytrading Stock Pairs Tired of trading Level II quotes and one-minute charts? Try a market-neutral strategy. by Mark Conway and Aaron Behle I t can take years of experience to discover one unique insight to exploit that can consistently pull money out of the stock market. Most traders have a bias as to market direction and position themselves accordingly; however, market-neutral strategies are becoming popular for those who are tired of trading on the gerbil wheel of Level II quotes and one-minute charts. Pairs trading is a market-neutral strategy where a long position in one stock and a short position in a correlated stock are taken simultaneously. The profit principle of the trade is based on mean reversion that is, two stocks that normally trade in the same direction become temporarily uncorrelated and eventually will revert to the mean. All of the published work on pairs trading relates to positions held over several days or as much as several months (for example, mergers and acquisitions). However, recent changes in margin requirements give the daytrader access to as much as 4:1 intraday buying power, which is perfectly suited to intraday pairs trading. This article presents a complete strategy for daytrading stock pairs. First, a definition for the spread is presented, along with a visual TradeStation indicator. Second, the volatility bands will be calculated to determine when a pairs trade is initiated. Third, the complete entry and exit rules for the intraday pair trading system are defined. Finally, examples are shown, complete with performance summaries. The allure of pairs trading is that it is a strategy with little risk; however, no stock is immune to the risk of a trading halt or an earnings warning. As with every other trading system, specific entry points, exit points, profit targets, and stop-losses need to be defined. First, I ll review the factors required for calculating the spread and the upper and lower bounds known as volatility bands. THE SPREAD The spread is a separate plot (see Figure 1) that compares the difference in price between two stocks and plots this value as a black line in real time within the volatility bands. The red line is the upper volatility band, and the green line is the lower volatility band; these bands are computed at the beginning of each trading day. When the spread line touches the upper band, the stock in the top panel (stock A) has become overvalued relative to the stock in the lower panel (stock B) a condition indicating that stock A should be shorted and stock B should be bought. When the spread touches the lower band, stock A has become undervalued relative to stock B. In this case, stock A should be bought and stock B should be shorted at the same time. The spread can be calculated according to the following formula: Spread = (Last A /Close A ) (Last B /Close B ) Divide the last price of stock A by its closing price yesterday, and do the same for stock B. Subtract the difference to obtain the current spread. VOLATILITY BANDS Let s focus on the factors needed to calculate the volatility bands. Each stock has a historical volatility (HV), which is a FIGURE 1: THE SPREAD. It s a simple calculation that compares the difference between two stocks. TRADESTATION (TRADESTATION TECHNOLOGIES)

2 percentage that measures the standard deviation of a stock s price change (the close of today compared to the close of yesterday) over a certain period of time. For example, if a stock trading at $20 has a 30-day HV of 20%, then that stock will have traded between a range of $16 and $24 over that 30-day period approximately 68% of the time based on the normal probability curve. For example, the current 30-day HV in Figure 2 is 1.13, or 113%, which is very high. The historical volatility of each stock in the pairs trade is part of the volatility band equation. The HV of all stocks can be obtained easily through websites like ivolatility.com. The site has 30-day HV readings as well as implied volatility (IV) readings. The next factor in the volatility band equation is the correlation coefficient, also known as R. This value correlates the movement of one stock price with another. A correlation of +1 means that the two stocks move in tandem, while a correlation of -1 means that the two stocks move in opposite directions. This pairs trading system is based on highly correlated stock pairs, with an R of at least 0.5. However, it is possible to reverse the signals to trade noncorrelated pairs. For further information on the correlation coefficient, go to the market-topology.com website. There, you can enter a stock symbol and the query will return a list of stocks that are most correlated. Figure 3 displays a daily chart of two highly correlated stocks with a correlation coefficient ranging between 0.75 and The next step is to calculate the volatility bands (VB) for a stock pair for one trading day. The formula is as follows (assuming 252 trading days in a year): FIGURE 2: HISTORICAL VOLATILITY. Here s a percentage that measures the standard deviation of the price change of a stock over a period of time. VB = HV 1 + HV 2 * * 1 R Let s start with an example of two highly correlated video-game software stocks, Activision (ATVI) and THQ (THQI): HV 30 of ATVI is 0.57 HV 30 of THQI is 0.70 R is 0.60 The volatility band of one standard deviation for the ATVI-THQI pair is: ( ) * * (1 0.60) = The next factor to determine is the number FIGURE 3: COEFFICIENT R. Here you see two highly correlated stocks with a correlation coefficient ranging between 0.75 and 0.95.

3 of standard deviations required to take a pairs trading system signal. We have selected 1.5 standard deviations as the default value, because prices have at least an 80% chance of reverting to the mean. We then multiply the volatility band value by the number of standard deviations to obtain the volatility band values. In the example in Figure 4, 1.5 * = Pairs trading system calculations Set the volatility factor (VF); default value is 1.5 Obtain the 30-day volatility of stock A (HV A ) Obtain the 30-day volatility of stock B (HV B ) Calculate the 30-day correlation of stock A and stock B (R AB ) Calculate the volatility band (VB) Calculate the spread (S). Entry rules 1 Long A Short B Entry S crosses above -VB Buy stock A the next bar one tick above the high Sell short stock B when stock A triggers. FIGURE 4: VOLATILITY BAND EXAMPLE. Volatility bands are important indicators when applying the pairs strategy. 2 Short A Long B Entry S crosses below VB Sell short stock A the next bar one tick below the low Buy stock B when stock A triggers. Exit rules 1 Long A Short B Exit Profit target: S crosses above zero Sell stock A Cover stock B Stop loss: S < (VF * -VB) Sell stock A Cover stock B 2 Short A Long B Exit Profit target: S crosses below zero Cover stock A Sell stock B Stop loss: S > (VF * VB) Cover stock A Sell stock B FIGURE 5: LONG ABGX/SHORT MEDX. When the spread crosses back above the lower VB, buy ABGX and sell short MEDX. EXAMPLES The following examples will clarify the pairs trading system. Some tips and techniques for pairs trading will be presented afterward. An example of a long A short B entry is displayed in Figure 5. Stock A (ABGX) has become undervalued relative to stock B (MEDX) because the spread has fallen below the lower volatility band (in green). As soon

4 as the spread crosses back above the lower VB, we would buy 1,000 shares of ABGX at a price of and sell short 1,000 shares of MEDX at (TradeStation does not allow simultaneous signals in two different plots, so the symbols have to be reversed to show the short signal in MEDX see the next example). The spread crosses above zero at 4 pm, at which point the ABGX long trade is exited at for a profit of 93 cents. Simultaneously, cover MEDX at 31 for a profit of 2.24 on the short leg of the trade. Together, the pairs trade nets = 3.17 points on 1,000 shares for a total profit of $3,170, not including slippage and commissions. The example in Figure 6 shows the reverse leg of the ABGX-MEDX pairs trade shown in Figure 5 and is a short A long B entry. Note the symmetry of the volatility bands in the Acme spread indicator. Essentially, this spread is a mirror image of the spread shown in the previous example, but the VB value is the same (0.065). The TradeStation performance reports after trading both legs of the ABGX-MEDX pairs from November 6, 2000, to August 31, 2001, are displayed in Figure 7. The New York Stock Exchange is an excellent vehicle for trading highly correlated pairs, especially among the oil service companies. The APA-APC pair displayed in Figure 8 has a correlation usually above 0.9, and exhibits smooth multiday swings between the volatility bands. In this example, there are two pairs trades. In the first trade (long APA/short APC), APA stays relatively flat while APC goes down sharply the ideal scenario. In the second trade, both stocks trade higher (they are correlated), but APC moves sharply higher and the spread plummets. This is the typical scenario for a pairs trade one profitable leg and one unprofitable leg but the objective is to capitalize on the price difference with proper position sizing. An excellent pairs trading strategy consists of selecting a correlated pair where one stock is a leader and the other is a laggard. Typically, the leader is a growth stock, and the laggard is either a value stock or a blue-chip stock with little volatility. In Figure 9, two insurance companies, Allstate and Progressive, have been selected to compose the ALL-PGR pair. The second pairs trade on April 6 gets stopped out when the spread goes half a band below the lower VB (-1.5 * 0.03 = ). The spread actually hit before reversing. The final pairs trade is taken on the cross above the lower VB. FIGURE 6: SHORT ABGX/LONG MEDX. Although the spread is a mirror image of that in the previous figure, the volatility bands remain the same. FIGURE 7: PERFORMANCE REPORTS. Here are the results of trading both legs of the ABGX/MEDX pairs trade from 11/6/00 to 8/31/01.

5 TRADING TIPS Here are a few more tips to keep in mind: 1 There is an almost infinite number of possible pairs in the stock market, but trading this strategy requires both liquidity and volatility. Filter out those stocks with little volume and low ADX readings. The key is to find two stocks in the same industry with high volatility. This list shows some of the more popular pairs: ABGX-MEDX ALL-PGR APA-APC ATVI-THQI BLDP-FCEL COF-PVN CPN-DYN GS-MWD HGSI-MLNM MERQ-MUSE UNH-WLP 2 When legging into a pairs trade, initiate the short trade first to make sure you can get an uptick, unless you have a forward conversion or bullet that allows you to short without an uptick. FIGURE 8: ONE PROFITABLE LEG AND ANOTHER UNPROFITABLE LEG. Both these stocks are highly correlated. When APC moves sharply higher, the spread drastically declines. 3 There are several alternatives for closing out a pairs trade. Some traders prefer to close out all trades at the end of the trading day, while others prefer to let the spread go to the opposite volatility band to a period of a few days. 4 If one of the stocks in the pairs trade has significant news, then the pairs trade may not be feasible because the spread may widen dramatically; however, the system rules preclude entering a trade until the spread starts reverting to the mean. 5 Find stock pairs that fit the leader/laggard criterion within a specific industry niche. Mark Conway and Aaron Behle are general partners of Groundswell Capital LP, a hedge fund based in Waltham, MA. For further information on pairs trading and other advanced trading systems, refer to the Acme Trader website ( RELATED READING Conway, Mark [1998]. Daytrading Stocks, Technical Analysis of STOCKS & COMMODITIES, Volume 16: August. See Traders Glossary for definition S&C FIGURE 9: A LEADER AND A LAGGARD. You can select a highly correlated pair of stocks where one is a leader and the other is a laggard. Find stock pairs that fit the leader/ laggard criterion within a specific industry niche.

Trading the GARTLEY 222

Trading the GARTLEY 222 Trading the GARTLEY 222 Sometimes old trading ideas are the best ideas if you can quantify them with modern analysis and testing procedures. Here, a "classic" chart pattern is defined mathematically and

More information

Market Velocity and Forces

Market Velocity and Forces Market Velocity and Forces SUPPORT DOCUMENT NASDAQ Market Velocity and Forces is a market sentiment indicator measuring the pre-trade order activity in the NASDAQ Stock Market trading system. It indicates

More information

Pivot Trading the FOREX Markets

Pivot Trading the FOREX Markets Pivot Trading the FOREX Markets A report by Jim White April, 2004 Pivot Research & Trading Co. 3203 Provence Place Thousand Oaks, Ca. 91362 Phone: 805-493-4221 FAX: 805-493-4349 Email: Jwhite43@adelphia.net

More information

EUR/USD Trading Strategy

EUR/USD Trading Strategy EUR/USD Trading Strategy TRADING SIGNALS TRADING EDUCATION TRADING STRATEGIES Kathy Lien & Boris Schlossberg www.bkforex.com TRADING SIGNALS & TRADING EDUCATION Risk Disclosure BKForex LLC is a registered

More information

ADX breakout scanning ADX breakouts can signal momentum setups as well as exit conditions for intraday and swing traders. FIGURE 1: AFTER ADX > 40

ADX breakout scanning ADX breakouts can signal momentum setups as well as exit conditions for intraday and swing traders. FIGURE 1: AFTER ADX > 40 TRADING STRATEGIES ADX breakout scanning ADX breakouts can signal momentum setups as well as exit conditions for intraday and swing traders. BY KEN CALHOUN FIGURE 1: AFTER ADX > 40 Spotting volatility

More information

Trading the Gartley 222

Trading the Gartley 222 Trading the Gartley 222 By Aaron Behle and Mark Conway 2003, Reprinted with permission of Active Trader magazine (www.activetradermag.com) Sometimes old trading ideas are the best ideas if you can quantify

More information

$TICK - Tock - Testing the NYSE TICK Index

$TICK - Tock - Testing the NYSE TICK Index Issue 12 Tuesday November 16, 2010 $TICK - Tock - Testing the NYSE TICK Index By Erik Skyba, CMT Senior Market Technician, TradeStation Labs TSLabs@TradeStation.com Focus Technical Study Markets Equities

More information

Chapter 2.3. Technical Analysis: Technical Indicators

Chapter 2.3. Technical Analysis: Technical Indicators Chapter 2.3 Technical Analysis: Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, from time to time those charts may be speaking a language you

More information

Chapter 18 STAYING WITH A TREND

Chapter 18 STAYING WITH A TREND Chapter 18 STAYING WITH A TREND While we are on the subject of the possibility of a day trader holding overnight, let s also see a way to stay with the trend allowing price volatility to dictate an exit

More information

TRADING SECRET NO. 3 How to combine two simple tools to capture big trending moves, especially in currencies

TRADING SECRET NO. 3 How to combine two simple tools to capture big trending moves, especially in currencies TRADING SECRET NO. 3 How to combine two simple tools to capture big trending moves, especially in currencies 25 Currencies have a reputation for being markets that trend well. And, every business day over

More information

Purpose of Selling Stocks Short JANUARY 2007 NUMBER 5

Purpose of Selling Stocks Short JANUARY 2007 NUMBER 5 An Overview of Short Stock Selling An effective short stock selling strategy provides an important hedge to a long portfolio and allows hedge fund managers to reduce sector and portfolio beta. Short selling

More information

Market Microstructure: An Interactive Exercise

Market Microstructure: An Interactive Exercise Market Microstructure: An Interactive Exercise Jeff Donaldson, University of Tampa Donald Flagg, University of Tampa ABSTRACT Although a lecture on microstructure serves to initiate the inspiration of

More information

TOMORROW'S TRADING TECHNOLOGY. 100% automated Fibonacci support and resistance levels that you can count on every single trading day in an instant.

TOMORROW'S TRADING TECHNOLOGY. 100% automated Fibonacci support and resistance levels that you can count on every single trading day in an instant. TOMORROW'S TRADING TECHNOLOGY 100% automated Fibonacci support and resistance levels that you can count on every single trading day in an instant. ProTrader Table of Contents 1. Areas A. Fibonacci Confluence

More information

Retracements With TMV

Retracements With TMV A Series Of Indicators Used As One Trade Breakouts And Retracements With TMV Making good trading decisions involves finding indicators that cut through the market noise. But how do you do it without collapsing

More information

Daytrading Cup Breakouts

Daytrading Cup Breakouts A Strategic Approach Daytrading Cup Breakouts inga poslitur Here s how you can daytrade momentum trades. ntering and exiting intraday trades using E precision technical trading signals has been popular

More information

Chapter 2.3. Technical Indicators

Chapter 2.3. Technical Indicators 1 Chapter 2.3 Technical Indicators 0 TECHNICAL ANALYSIS: TECHNICAL INDICATORS Charts always have a story to tell. However, sometimes those charts may be speaking a language you do not understand and you

More information

Factual statements in this course are made as of the date the course was created and are subject to change without notice.

Factual statements in this course are made as of the date the course was created and are subject to change without notice. 1 HOW TO AVOID CHOPPY MARKETS Dr. Barry Burns Copyright 2007 Top Dog Trading IMPORTANT-READ CAREFULLY: Reproduction, translation, or distribution in any form or by any means, or storage in a data base

More information

My Daily Trading Preparation. Establishing Risk Parameters and Positions

My Daily Trading Preparation. Establishing Risk Parameters and Positions My Daily Trading Preparation Establishing Risk Parameters and Positions My Trading Goals My goals have to be consistent with my trading plan each day. For stocks, I am primarily a long-only trader (and

More information

FUTURES STRATEGY: Short-term CCI p. 10. ADJUSTING TO stock index futures shift p. 14. STRADDLES, STRANGLES, and volatility p. 16

FUTURES STRATEGY: Short-term CCI p. 10. ADJUSTING TO stock index futures shift p. 14. STRADDLES, STRANGLES, and volatility p. 16 May 2009 Volume 3, No. 5 FUTURES STRATEGY: Short-term CCI p. 10 ADJUSTING TO stock index futures shift p. 14 STRADDLES, STRANGLES, and volatility p. 16 FEAR AND LOATHING in the options market p. 20 TRADING

More information

General Forex Glossary

General Forex Glossary General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

More information

Thinking Man s Trader

Thinking Man s Trader Thinking Man s Trader Advanced Trader s Package Trading is a three dimensional world and the Advanced Trader s Package covers all three. Dimension three: Market Dynamics, conditions and change of conditions

More information

Technical Indicators Tutorial - Forex Trading, Currency Forecast, FX Trading Signal, Forex Training Cour...

Technical Indicators Tutorial - Forex Trading, Currency Forecast, FX Trading Signal, Forex Training Cour... Page 1 Technical Indicators Tutorial Technical Analysis Articles Written by TradingEducation.com Technical Indicators Tutorial Price is the primary tool of technical analysis because it reflects every

More information

Forex Pair Performance Strength Score

Forex Pair Performance Strength Score Issue 50 Wednesday, September 11, 2013 Forex Pair Performance Strength Score Michael Burke Vice-president of Client Training and Education TSLabs@TradeStation.com Features Studies/Files Included: Focus:

More information

2 www.activetradermag.com April 2001 ACTIVE TRADER

2 www.activetradermag.com April 2001 ACTIVE TRADER W h o s afraid of volatility? Not anyone who wants a true edge in his or her tra d i n g, t h a t s for sure. Get a handle on the essential concepts and learn how to improve your trading with p ractical

More information

The 15 50 Trading System

The 15 50 Trading System Main Premise: This is considered to be one of the most straight forward systems for a live trading style for day- and/or intraday trading. The 50 SMA is one of the most commonly used moving average numbers

More information

THE POWER OF FOREX OPTIONS

THE POWER OF FOREX OPTIONS THE POWER OF FOREX OPTIONS TOPICS COVERED Option basics Call options Put Options Why trade options? Covered call Covered put Hedging your position using options How to repair a trading position THE POWER

More information

HIGH PROBABILITY. Trading Made Easy! Nirvana s PairTrader 2.0. The POWER of Pair Trading CD Seminar see page 5. INSIDE:

HIGH PROBABILITY. Trading Made Easy! Nirvana s PairTrader 2.0. The POWER of Pair Trading CD Seminar see page 5. INSIDE: Nirvana s PairTrader 2.0 HIGH PROBABILITY Trading Made Easy! Discover what hedge funds, institutions and many shrewd investors have known for years Pair Trading offers consistent profi ts with reduced

More information

Turk s ES ZigZag Day Trading Strategy

Turk s ES ZigZag Day Trading Strategy Turk s ES ZigZag Day Trading Strategy User Guide 11/15/2013 1 Turk's ES ZigZag Strategy User Manual Table of Contents Disclaimer 3 Strategy Overview.. 4 Strategy Detail.. 6 Data Symbol Setup 7 Strategy

More information

MATHEMATICAL TRADING INDICATORS

MATHEMATICAL TRADING INDICATORS MATHEMATICAL TRADING INDICATORS The mathematical trading methods provide an objective view of price activity. It helps you to build up a view on price direction and timing, reduce fear and avoid overtrading.

More information

Let s Get to Know Spread Bets

Let s Get to Know Spread Bets Let s Get to Know Spread Bets Spread betting is pretty cool. Here are three reasons why. Even if you ve never traded before, you probably know how the financial market works buy in and hope it goes up.

More information

Retracement Or Reversal. Kennsei Trading, Inc. Chief Trader Dinger dinger@kennseitrading.com www.hotstocksforincome.com

Retracement Or Reversal. Kennsei Trading, Inc. Chief Trader Dinger dinger@kennseitrading.com www.hotstocksforincome.com Retracement Or Reversal Kennsei Trading, Inc. Chief Trader Dinger dinger@kennseitrading.com www.hotstocksforincome.com Retracement Or Reversal Most of us have wondered, at some point, whether a decline

More information

Take it E.A.S.Y.! Dean Malone 4X Los Angeles Group - HotComm January 2007

Take it E.A.S.Y.! Dean Malone 4X Los Angeles Group - HotComm January 2007 Take it E.A.S.Y.! Dean Malone 4X Los Angeles Group - HotComm January 2007 Dean Malone Partner of Compass Foreign Exchange, LLC. Co-Founder of Forex Signal Service.com. Previous Senior National for 4X Made

More information

Trading Intra-Day is All About Finding an Edge (May 2008)

Trading Intra-Day is All About Finding an Edge (May 2008) Trading Intra-Day is All About Finding an Edge (May 2008) Trading intra-day is exactly what it sounds like. It s sitting in front of a computer during the trading day and making a lot of trades for small

More information

I Really Trade. Trading Patterns for Stocks & Commodities. Introducing The False Break Buy and Sell Pattern

I Really Trade. Trading Patterns for Stocks & Commodities. Introducing The False Break Buy and Sell Pattern 2008 Trading Patterns for Stocks & Commodities It doesn t matter if you are a longterm investor, short swing trader or day trader, you are always looking for an advantageous spot to enter your position.

More information

THE CYCLE TRADING PATTERN MANUAL

THE CYCLE TRADING PATTERN MANUAL TIMING IS EVERYTHING And the use of time cycles can greatly improve the accuracy and success of your trading and/or system. THE CYCLE TRADING PATTERN MANUAL By Walter Bressert There is no magic oscillator

More information

WEB TRADER USER MANUAL

WEB TRADER USER MANUAL WEB TRADER USER MANUAL Web Trader... 2 Getting Started... 4 Logging In... 5 The Workspace... 6 Main menu... 7 File... 7 Instruments... 8 View... 8 Quotes View... 9 Advanced View...11 Accounts View...11

More information

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013

SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS. SaviTrading LLP 2013 SAVI TRADING 2 KEY TERMS AND TYPES OF ORDERS 1 SaviTrading LLP 2013 2.1.1 Key terms and definitions We will now explain and define the key terms that you are likely come across during your trading careerbefore

More information

Introduction... 4 A look at Binary Options... 5. Who Trades Binary Options?... 5. Binary Option Brokers... 5 Individual Investors...

Introduction... 4 A look at Binary Options... 5. Who Trades Binary Options?... 5. Binary Option Brokers... 5 Individual Investors... Table of Contents Introduction... 4 A look at Binary Options... 5 Who Trades Binary Options?... 5 Binary Option Brokers... 5 Individual Investors... 5 Benefits of Trading Binary Options... 6 Binary Option

More information

Chapter 4 - Picking the time frame

Chapter 4 - Picking the time frame Chapter 4 - Picking the time frame In this chapter we ll discuss the different time frames of operations available to the trader and their relative returns, considering both ideal and real-world situations.

More information

BROKER SERVICES AND PLATFORM

BROKER SERVICES AND PLATFORM BROKER SERVICES AND PLATFORM A broker is an individual who executes buy and sell orders and get commission in the form of SPREAD (I will talk about SPREAD in the subsequent lessons). You trade through

More information

INDUSTRY LEADING DERIVATIVES EXPERTS. www.insightcapitalstrategies.com Tel: 0141 375 1246

INDUSTRY LEADING DERIVATIVES EXPERTS. www.insightcapitalstrategies.com Tel: 0141 375 1246 INDUSTRY LEADING DERIVATIVES EXPERTS www.insightcapitalstrategies.com Tel: 0141 375 1246 Insight specialises in generating tax-free capital growth by investing client funds using spread betting platforms

More information

Stock Trading Systems: Analysis and Development of a System of Systems

Stock Trading Systems: Analysis and Development of a System of Systems Stock Trading Systems: Analysis and Development of a System of Systems An Interactive Qualifying Project Submitted to the Faculty of WORCESTER POLYTECHNIC INSTITUTE In partial fulfillment of the requirements

More information

Trade Navigator. Genesis. TradeSense Manual. Finally Strategy Development and Back Testing Just Got Easier! Financial Technologies Inc.

Trade Navigator. Genesis. TradeSense Manual. Finally Strategy Development and Back Testing Just Got Easier! Financial Technologies Inc. 100 90 55 0 5 10 80 70 60 50 40 30 20 100 90 55 0 5 10 0 140 130 120 110 80 70 60 50 40 30 20 10 Trade Navigator TradeSense Manual 140 130 120 110 10 0 brought to you by... Genesis Financial Technologies

More information

Technical Indicators Explained

Technical Indicators Explained Chapter I. Technical Indicators Explained In This Chapter The information in this chapter is provided to help you learn how to use the technical indicators that are available for charting on the AIQ TradingExpert

More information

How to Win the Stock Market Game

How to Win the Stock Market Game How to Win the Stock Market Game 1 Developing Short-Term Stock Trading Strategies by Vladimir Daragan PART 1 Table of Contents 1. Introduction 2. Comparison of trading strategies 3. Return per trade 4.

More information

Reverse spreads: theoretical foundations and trading model

Reverse spreads: theoretical foundations and trading model Reverse spreads: theoretical foundations and trading model Introduction Those who already faced the Trend following concept know that effective strategies of following the trend suggest dynamic stop loss

More information

The Magic Momentum Method of Trading the Forex Market

The Magic Momentum Method of Trading the Forex Market The Magic Momentum Method of Trading the Forex Market WELCOME! Welcome to one of the easiest methods of trading the Forex market which you can use to trade most currencies, most time frames and which can

More information

Stop Investing and Start Trading. How I Trade Technical Strategies Over Fundamental Strategies

Stop Investing and Start Trading. How I Trade Technical Strategies Over Fundamental Strategies Stop Investing and Start Trading How I Trade Technical Strategies Over Fundamental Strategies PREPARATION PRIOR TO OPENING MARKET 1. On Daily Log Sheet record NAV [Net Asset Value] of portfolio. 2. Note

More information

Leon Wilson Trading Success

Leon Wilson Trading Success Leon Wilson Trading Success A talk given by Mary de la Lande to the BullCharts User Group Meeting on 13 February 2008 1. Who is Leon Wilson? His Books and where to get them. 2. Book 1: The Business of

More information

To Cope with Stress? DEMONS of Traders DEMONS. The Mysteries of the Trend Using the Opening Price. The Thought

To Cope with Stress? DEMONS of Traders DEMONS. The Mysteries of the Trend Using the Opening Price. The Thought ASIA PACIFIC S PREEMINENT TRADING MAGAZINE ASIA PACIFIC S PREEMINENT TRADING MAGAZINE November / December 2005 www.traders-journal.com MICA (P) 352/05/2005 The Mysteries of the Trend Using the Opening

More information

Day Trade System EZ Trade FOREX

Day Trade System EZ Trade FOREX Day Trade System The EZ Trade FOREX Day Trading System is mainly used with four different currency pairs; the EUR/USD, USD/CHF, GBP/USD and AUD/USD, but some trades are also taken on the USD/JPY. It uses

More information

Trading Manual. Effective date: 07 July 2015

Trading Manual. Effective date: 07 July 2015 Trading Manual Effective date: 07 July 2015 LMAX Trading Manual Effective date: 07 July 2015 This Trading Manual ( the Manual ) provides further information and worked examples on our trading services.

More information

The 3 Rules of Successful Swing Trading

The 3 Rules of Successful Swing Trading The 3 Rules of Successful Swing Trading Trade with the Wind at Your Back The Rule That Hits Home Runs & Be In the Right Place at the Right Time by Michele Mish Schneider, Director of Trading Research &

More information

Four of the precomputed option rankings are based on implied volatility. Two are based on statistical (historical) volatility :

Four of the precomputed option rankings are based on implied volatility. Two are based on statistical (historical) volatility : Chapter 8 - Precomputed Rankings Precomputed Rankings Help Help Guide Click PDF to get a PDF printable version of this help file. Each evening, once the end-of-day option data are available online, the

More information

Z.com Trader. User Guide version 1.4

Z.com Trader. User Guide version 1.4 Z.com Trader User Guide version.4 Table of Contents. The Platform 4. Simple Chart 0 User Preference. How to Trade 4 a. Panel b. List c. Simple Trade d. Complex Trade e. One-Click Trade 5. Transactions

More information

THE TRADE-OR-FADE METHOD:

THE TRADE-OR-FADE METHOD: THE TRADE-OR-FADE METHOD: How to Trade Short-Term Using the Technical Analysis Spreadsheets and the Intra-day Support & Resistance by Scott Hoffman 1.800.800.3840 The Trade or Fade Advisory The Trade or

More information

Asset allocation A key component of a successful investment strategy

Asset allocation A key component of a successful investment strategy Asset allocation A key component of a successful investment strategy This guide has been produced for educational purposes only and should not be regarded as a substitute for investment advice. Vanguard

More information

Professional Trader Series: Moving Average Formula & Strategy Guide. by John Person

Professional Trader Series: Moving Average Formula & Strategy Guide. by John Person Professional Trader Series: Moving Average Formula & Strategy Guide by John Person MOVING AVERAGE FORMULAS & STRATEGY GUIDE In an online seminar conducted for the Chicago Board of Trade, I shared how to

More information

ValueCharts TradeStation

ValueCharts TradeStation ValueCharts TradeStation ValueCharts TradeStation indicator suite can be located in the TradeStation Strategy Network under MicroQuantSM products. Free trial subscription periods are available for all

More information

Guidelines to use with Fibonacciqueen trade setups!!!

Guidelines to use with Fibonacciqueen trade setups!!! Guidelines to use with Fibonacciqueen trade setups!!! Updated January 2014 As far as the price analysis that I run every day in the markets, there are three different types of Fibonacci price relationships

More information

Simpler Options. Indicator guide. An informative reference for John Carter s commonly used trading indicators. www.simpleroptions.

Simpler Options. Indicator guide. An informative reference for John Carter s commonly used trading indicators. www.simpleroptions. Simpler Options Indicator guide An informative reference for John Carter s commonly used trading indicators At Simpler Options you will see a handful of proprietary indicators on John Carter s charts.

More information

Click on the below banner to learn about my revolutionary method to trade the forex market:

Click on the below banner to learn about my revolutionary method to trade the forex market: By Avi Frister http://www.forex-trading-machine.com Click on the below banner to learn about my revolutionary method to trade the forex market: Copyright 2008 The Forex Navigator System. All rights reserved

More information

Trading Binary Options Strategies and Tactics

Trading Binary Options Strategies and Tactics Trading Binary Options Strategies and Tactics Binary options trading is not a gamble or a guessing game. By using both fundamental and technical market analysis, you are able to get a better understanding

More information

Chapter 8. Trading using multiple time-frames

Chapter 8. Trading using multiple time-frames Chapter 8 Trading using multiple time-frames TRADING USING MULTIPLE TIME- FRAMES Stock markets worldwide function because, at any given time, some traders want to buy whilst others want to sell. A trader

More information

Risk Disclosure Statement for CFDs on Securities, Indices and Futures

Risk Disclosure Statement for CFDs on Securities, Indices and Futures Risk Disclosure on Securities, Indices and Futures RISK DISCLOSURE STATEMENT FOR CFDS ON SECURITIES, INDICES AND FUTURES This disclosure statement discusses the characteristics and risks of contracts for

More information

Options Scanner Manual

Options Scanner Manual Page 1 of 14 Options Scanner Manual Introduction The Options Scanner allows you to search all publicly traded US equities and indexes options--more than 170,000 options contracts--for trading opportunities

More information

OVERNIGHT GAP STRATEGY FOR 2016 By Daryl Guppy

OVERNIGHT GAP STRATEGY FOR 2016 By Daryl Guppy OVERNIGHT GAP STRATEGY FOR 2016 By Daryl Guppy Gap openings are becoming more frequent in 2016 markets. This is a reflection of a change in market volatility and a change in the structure of the market

More information

THE MOST POWERFUL DAY TRADING SETUP PERIOD!

THE MOST POWERFUL DAY TRADING SETUP PERIOD! THE MOST POWERFUL DAY TRADING SETUP PERIOD! In this pdf I will show you how I combine my institutional numbers with my 40-60 number count 9 and 13 setups. Below you will find my concrete rules on when

More information

Reliance Securities A Reliance Capital Company

Reliance Securities A Reliance Capital Company Reliance Securities A Reliance Capital Company Risk Management Policy April 25, 2013 SEBI, vide its circular ref. no. SEBI/MRD/DoP/SE/Cir-07/2005 dated February 23, 2005 has advised the Stock Exchanges

More information

NEXGEN DEMO TRADING & EDUCATIONAL PLAN SIMPLIFIED

NEXGEN DEMO TRADING & EDUCATIONAL PLAN SIMPLIFIED NEXGEN DEMO TRADING & EDUCATIONAL PLAN SIMPLIFIED Please watch the intro Video so you understand Nexgen's expectations for your demo time and what you should expect from us during your demo. CLICK TO WATCH

More information

EF MetaTrader 5 for Android OS

EF MetaTrader 5 for Android OS User Guide for the online trading platform EF MetaTrader 5 for Android OS Euro-Finance 43 Christopher Columbus blvd., 1592 Sofia, Bulgaria tel.: +359 (0) 700 156 56; fax: +359 (0) 2 981 14 96 support@eurofinance.bg

More information

LET S GET TO KNOW SPREAD BETS

LET S GET TO KNOW SPREAD BETS LET S GET TO KNOW SPREAD BETS Spread betting is pretty cool. Here are three reasons why. Even if you ve never traded before, you probably know how the financial market works buy in and hope it goes up.

More information

Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 12 Market Microstructure and Strategies Chapter Objectives describe the common types of stock transactions explain how stock transactions

More information

SPREAD BETTING MODULE 3 RISK MANAGEMENT 1 MODULE. Spread betting. Risk Management

SPREAD BETTING MODULE 3 RISK MANAGEMENT 1 MODULE. Spread betting. Risk Management RISK MANAGEMENT 1 MODULE 3 Spread betting Risk Management RISK MANAGEMENT 2 How to use this module Navigation There are two navigation systems in this PDF. You can move forwards and backwards using the

More information

Three-Bar Inside Bar Pattern

Three-Bar Inside Bar Pattern How It Works On Gold And Silver And Crude Three-Bar Inside Bar Pattern This trading strategy uses an inside bar as a three-bar pattern for long and short positions. Find out how it performed on gold, silver,

More information

MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS

MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS CLIENT SERVICE AGREEMENT Halifax New Zealand Limited Client Service Agreement Product Disclosure Statement for MARGIN FOREIGN EXCHANGE AND FOREIGN EXCHANGE OPTIONS Halifax New Zealand Limited Financial

More information

The Logic Of Pivot Trading

The Logic Of Pivot Trading Stocks & Commodities V. 6: (46-50): The Logic Of Pivot Trading by Jim White This methodology takes advantage of the short-term trends in the market and applies a pivot trading technique to earn superior

More information

Trading Diary Manual

Trading Diary Manual Plum Square Software Ltd. Trading Diary Manual Contents Introduction!1 WWW www.plumsquare.com EMAIL support@plumsquare.com Getting started!2 Planning a new trade!4 Managing open trades!8 Reviewing closed

More information

Elder-disk for TeleChart (TC2005 / TC2007) Version 2.01

Elder-disk for TeleChart (TC2005 / TC2007) Version 2.01 Elder-disk for TeleChart (TC2005 / TC2007) Version 2.01 Thank you for purchasing this Elder-disk. It was developed by Dr. Alexander Elder, the author of TRADING FOR A LIVING, COME INTO MY TRADING ROOM,

More information

Using JMP for Technical Analysis of stocks in highly volatile markets Bill Gjertsen, SAS Institute Inc., Cary, NC

Using JMP for Technical Analysis of stocks in highly volatile markets Bill Gjertsen, SAS Institute Inc., Cary, NC Using JMP for Technical Analysis of stocks in highly volatile markets Bill Gjertsen, SAS Institute Inc., Cary, NC Abstract We live in a world of high uncertainty. Internet related stocks that appreciate

More information

Market Technician, TradeStation Labs TSLabs@TradeStation.com

Market Technician, TradeStation Labs TSLabs@TradeStation.com Market Technician, TradeStation Labs TSLabs@TradeStation.com Standard deviation is a common statistical calculation that is often used in the world of finance to measure risk. The higher the standard deviation,

More information

The Intraday Bias Indicator

The Intraday Bias Indicator Wednesday, June 13, 2012 Issue 41 Wednesday, August 8, 2012 Intraday Time Analysis Erik Skyba, CMT Senior Quantitative Analyst TSLabs@TradeStation.com Features Studies/Files Included: Focus: Technical

More information

SWFX - Swiss FX Marketplace Manual V.18.06.2010

SWFX - Swiss FX Marketplace Manual V.18.06.2010 SWFX - Swiss FX Marketplace Manual V.18.06.2010 1/41 Table of contents 1. Disclaimer... 3 1.1. Market Risk... 3 1.2. Operational Risk... 3 1.3. Platform User Guide... 3 1.4. Demo Versus Live Platform...

More information

ACTIVE TRADING WITH TRADESTATION AND THE STOCKSCORES STRATEGIES

ACTIVE TRADING WITH TRADESTATION AND THE STOCKSCORES STRATEGIES ACTIVE TRADING WITH TRADESTATION AND THE STOCKSCORES STRATEGIES WORKSPACE/DESKTOP LAYOUT There are infinite ways to set up your Tradestation layout; how you do it is a personal preference. The process

More information

Using Implied Volatility And Volume

Using Implied Volatility And Volume BASIC TECHNIQUES Forecasting Trends With Indexes Using Implied Volatility And Volume Construct a trend-following system that adjusts to current market conditions. T raditionally, technicians have relied

More information

Chapter 3.4. Forex Options

Chapter 3.4. Forex Options Chapter 3.4 Forex Options 0 Contents FOREX OPTIONS Forex options are the next frontier in forex trading. Forex options give you just what their name suggests: options in your forex trading. If you have

More information

Trading Education. July 2014. The Five Key Elements of CFD Trading. The Five Key Elements of CFD Trading INTRODUCTION

Trading Education. July 2014. The Five Key Elements of CFD Trading. The Five Key Elements of CFD Trading INTRODUCTION READ OUR FULL RISK WARNING. Spread betting, Contracts for Differences (CFDs) & Foreign Exchange (FX) are leveraged products & carry a high level of risk to your capital as prices might move rapidly against

More information

Methods to Trade Forex Successfully for Quick Profits

Methods to Trade Forex Successfully for Quick Profits Methods to Trade Forex Successfully for Quick Profits This article is devoted to the techniques that are used to trade Forex on an intraday basis for quick profits. The aim is to make the trading a successful

More information

100 pips daily scalper

100 pips daily scalper 100 pips daily scalper User s manual August 2011 www.100pipsdailyscalper.com DISCLAIMER Please be aware of the loss, risk, personal or otherwise consequences of the use and application of this book s content.

More information

A powerful dashboard utility to improve situational awareness of the markets, place precise orders, and graphically monitor trading positions.

A powerful dashboard utility to improve situational awareness of the markets, place precise orders, and graphically monitor trading positions. A powerful dashboard utility to improve situational awareness of the markets, place precise orders, and graphically monitor trading positions. Position DashBoard Powered by BAR ANALYZER Position DashBoard

More information

How to see the market context using CCI Written by Buzz

How to see the market context using CCI Written by Buzz How to see the market context using CCI Written by Buzz Towards the end of September 2003, I decided to stop trading the S&P e-mini for a while and focus on the Russell 2000 e-mini. The swings seemed to

More information

1 Volatility Trading Strategies

1 Volatility Trading Strategies Brunel University Msc., EC5504, Financial Engineering Prof Menelaos Karanasos Lecture Notes: Volatility Trading Strategies 1 Volatility Trading Strategies As previously explained, volatility is essentially

More information

Commodity Channel Index

Commodity Channel Index Commodity (CCI) Developed by Donald Lambert, the Commodity (CCI) was designed to identify cyclical turns in commodities but can be applied to shares as well. The Commodity Channel Index uses a typical

More information

OPTIONS TRADING AS A BUSINESS UPDATE: Using ODDS Online to Find A Straddle s Exit Point

OPTIONS TRADING AS A BUSINESS UPDATE: Using ODDS Online to Find A Straddle s Exit Point This is an update to the Exit Strategy in Don Fishback s Options Trading As A Business course. We re going to use the same example as in the course. That is, the AMZN trade: Buy the AMZN July 22.50 straddle

More information

Pivot Point Trading. If you would rather work the pivot points out by yourself, the formula I use is below:

Pivot Point Trading. If you would rather work the pivot points out by yourself, the formula I use is below: Pivot Point Trading You are going to love this lesson. Using pivot points as a trading strategy has been around for a long time and was originally used by floor traders. This was a nice simple way for

More information

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs.

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs. OPTIONS THEORY Introduction The Financial Manager must be knowledgeable about derivatives in order to manage the price risk inherent in financial transactions. Price risk refers to the possibility of loss

More information

Trading The Euro: Box It, Squeeze It, Love It, Leave It

Trading The Euro: Box It, Squeeze It, Love It, Leave It Trading The Euro: Box It, Squeeze It, Love It, Leave It by: John Carter Think inside the box when trading currency pairs, and identify boxes on currency charts to create better trading setups. [Editor

More information

Option pricing. Module 3

Option pricing. Module 3 Course #: Title Module 3 Option pricing Topic 1: Intrinsic value and time value... 3 Intrinsic value... 3 In-the-money, out-of-the-money, at-the-money... 3 Time value... 4 Topic 2: What affects an option's

More information

Options. Understanding options strategies

Options. Understanding options strategies Options Understanding options strategies Contents Introduction 2 Option profiles 3 Covered write 4 Protected covered write 6 Stock repair strategy 8 Bull spread 10 Bear spread 12 Long straddle 14 Short

More information

THE THERMOSTAT TRADING STRATEGY

THE THERMOSTAT TRADING STRATEGY Trading Strategies That Work 119 THE THERMOSTAT TRADING STRATEGY We actually traded a strategy very similar to Thermostat. We named this system based on its ability to switch gears and trade in the two

More information