Pair Trade of the Month: December 2021

Trading Checklist for Signal Filtering: The Cheat Sheet!

Alliance Bernstein vs. Victory Capital

$457 on $2,000 margin in 6 Market Days

23% Return on Margin!

($5,000/leg using 5:1 CFD margin)

Trading checklist

For those of you who have been pair trading for awhile, and especially for anyone newly entering the activity, we’ve prepared a detailed video that captures our trading checklist that we deploy for pair trading signal filtering.

Watch pair trader Pedro Alonso take you through his thorough and effective trading checklist for filtering PairTrade Finder® PRO trading signals. See our “Cheat Sheet” in action for finding and managing the best stock pair trades.

PairTrade Finder®’s TOP 30 U.S. Equities Pairs & Pair Trading Signals

We analyse over 2,200 U.S. equities to find you the best USA stock pairs to trade.  That is your first trading checklist – we do all the hard work for you!  We update this analysis on a quarterly basis to ensure these pairs stay fresh and their correlations and cointegrations strong to offer you the highest-probability setups.

What filters do we use? Well, here’s the list:

  • USA (NYSE/NASDAQ/AMEX): > than $5 bln mkt cap (most much larger), > $10 million/day of avg. daily traded volume($)
  • Easy-to-borrow
  • Similar fundamentals: same market, same sector, usually same industry sub group. Beta-similar, market-cap-similar pairs
  • Backtested with a +/-2.7 standard deviation Entry Stretch, +/-1.0 standard deviation Exit Stretch
  • Three-year backtest period, Stretch & Ratio Moving Average set to 63-day lookbacks
  • COINTEGRATION: We select only pairs with a p-value of 0.10 or less over the last 18 months or so
  • AVG. CORRELATION: of minimum 50%, preferably higher over the three-year period
  • Minimum Average Profit per Trade of $200, preferably $250+ (based on $5,000/leg)
  • Compound Annual Growth Rate of Net Profits for each pair preferably in excess of Maximum Drawdown % i.e. positive reward/risk
  • Maximum historic drawdown < 20%, preferably <15% (before leverage)
  • Win Rate at least 70%
  • RSI Filter Applied: Only trades that trigger with a 14-day RSI of the Ratio at an extreme reading are called for signals
  • Maximum Days in Trade of 60 days. This setting represents our time stop. Average days per trade is around 12-15 day

Then, with these great pairs autoloaded into your 24/7 market radar Watchlist, you will receive live trading signals directly on-screen and by email.  You can then semi-autotrade these signals directly into Interactive Brokers’ Trader Workstation® for easy execution.

The Trading Checklist, or “Cheat Sheet”

Once you receive a live signal from PairTrade Finder® PRO, we then apply the Trading Checklist Cheat Sheet.  It contains 12 elements to review to ensure you are choosing the highest probability setups to trade.  The video above, made by pair trader Pedro Alonso Calvo,  shows you what it’s all about.

How Can I Get Started?

Subscribe today and receive a 15-Day Free Trial of PairTrade Finder® PRO with these Top 30 U.S. Equities Pairs PRELOADED into your Watchlist.  PTF PRO will immediately begin generating live trading signals from these pairs for your further review!

We also provide you with our eBook with 11 Pro Trading Tips, our 13 Tutorial Videos, and a 4-HOUR, 13-LECTURE PAIR TRADING VIDEO TRAINING COURSE taught by professional pair traders, including how to backtest for the best pairs, filter trading signals for entry, apply sensible position sizing and trade management techniques, and manage a portfolio to give you the best shot at reaching consistent profitability.

Find out all about it at www.pairtradefinder.com

Happy trading.

Geoff, Paul & The PairTrade Finder® Team

NB: The TOP 30 example pair trades in PairTrade Finder® PRO and the trading signals generated therefrom are provided for informational and educational purposes only. They should not be construed as personalised investment advice. It should not be assumed that trading using the parameters demonstrated by the Software will be profitable and will not result in losses. Please see our full Terms & Disclaimer here.

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