How do you execute your orders in Pair Trading?

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How do you execute your orders in Pair Trading?

posted Nov 2, 2018

Finance Theory Pairs Trading Futures

Dear All,

My name is Jay and I was doing some research on the pairs trading, but come up with several questions on the executions in real trading.

I have a constraint of my trading and it is an intraday trading limitation.

I have found some pairs that are profitable by using "current price data", a cointegration concept, and mixed other models.

My concern is that the calculated profit is the profit that if all the orders were filled fully with a limit order at the current price.

I have tried to send orders as market orders for the strategy, but the strategy didn't work anymore due to the 4 tick profit loss (Entry Long/Short, Exit Short/Long == 4 tick loss).

My question is how people send orders in pairs trading? Are they sending the market orders to reduce the "Not filled risk"?

Please kindly share your experience and thoughts on this.

Thank you very much.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.