Trading Pairs: Capturing Profits and Hedging Risk with Statistical Arbitrage Strategies
$26.83
| Author(s) | |
|---|---|
| Format |
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| Pages |
288 |
| Published Date |
2004 |
Pairs trading is an effective trading style that has traditionally been utilized by institutional investors such as hedge funds and savvy individuals who trade for a living. But today, this style has been adopted by a broad range of traders–from the novice to the veteran. With the help of technology and some commonsense guidance, you too can begin using this technique to boost the profits of your portfolio.
Introduction:
This book is intended for the average investor who would like to gain a new perspective on the market. Traditionally, when we invest, we either buy or sell a stock, and then hope that it moves in our chosen direction. However, at times this strategy leaves us with a “naked” position that is simply at the mercy of the market.
Thus, pairs trading offers a unique alternative, and allows the individual investor a way to “hedge” positions. Think about it for a moment. If you have a long and a short position, then you are technically market neutral. And if the broader indices fall 200 points—in theory—your position should still be “flat.” The goal is to protect our portfolios from dra-matic market swings up or down, while finding stock relationship inequali-ties, in an effort to make money.
As a result, this book attempts to present the information of pairs in an easy-to-read format that allows the reader a new way of approaching invest-ing. In addition, the book is geared for “at home” investors who do not have expensive trading software. In fact, if you have access to the Internet and Microsoft Excel, you can do everything in this book. A little patience and drive will help you to reshape your current paradigm of the market.
Contents:
- The Nuts and Bolts
- Why Fundamental Analysis?
- Market Basics
- Technical Analysis
- Technical Analysis Indicators
- Basic Pairs Terminology
- Importing Data into Excel
- Understanding Correlations—Steve Price
- Understanding Stock Correlations in Relation to Indices
- Basic Statistics
- Excel and Statistics
- Differential versus Ratio
- Applying Statistics to Pairs
- Taking a Step Back for a Moment
- Moving Averages and Normalized Standard Deviation
- Money Management
- The Reality of Pairs
- The Current Setup
- Trading Diary
- Correlating Stocks to Indices
- Understanding Volatility
- Understanding Volatility and Options
- Using Technical and Fundamental Analysis
- Assorted Advice to Assist Tradingwith Pairs
Trading Pairs: Capturing Profits and Hedging Risk with Statistical Arbitrage Strategies By Mark Whistler pdf
12 reviews for Trading Pairs: Capturing Profits and Hedging Risk with Statistical Arbitrage Strategies
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John Cannon (verified owner) –
If you are new to the concept of trading pairs, like I was, this book really gives you a strong foundation of knowledge to build on. Like any advanced trading strategy, it certainly takes a commitment on your part to really understand the technique thoroughly, but in the end – it’s worth it.
Makenna Haynes (verified owner) –
While I do not fault this book for being simple, as it seems directed at new traders, the writing is lacking. At one point the author jokingly refers to Microsoft as the root of all evil. While conversational writing may be appropriate for some subjects, it was distracting and ultimately irritating. Additionally, I do not need to see screenshots of Yahoo or excel… There are better choices.
Cullen Watkins (verified owner) –
Trading Pairs is a great read for those new to pairs. Most of the books (on pairs) are incredibly complicated, and leave out the possibility that the reader may be fresh to the market. Though this book would probably be a little simple for market professionals, it is outstanding for those new to pairs. The writing style is fun, and easy to read — and not too technical. If you’re a market statistician, the book may be a little slow, but this doesn’t seem to be the audience the author was writing for.
The book seems to focus on the fundamental understanding of how pairs work, not just a ton of math and trading systems. This book is great for anyone new to the market and pairs!!!
Ila Clark (verified owner) –
As a professional in the ETF business I highly recommend this book on Trading Pairs. Going-long one equity and selling short is a way to reduce risk in your portfolio and Mr. Whistler details this strategy nicely. He writes with clear and concise explanations of this trading style. A must read for anyone thinking of shorting a stock.
Kason Lucero (verified owner) –
At first I was thinking that this would be a good book if:
1. You have no business background
2. You have no finance background
3. You have no background in math or statistics
After reading the book I realized that my rating has nothing to do with the content of the book. Its just a plain old bad book.
In grad school we talk about going over things at 10,000ft the idea being that we don’t dive too far into details. This book goes over things at 50,000ft. The author attempts to cover so many subject areas that he neglects thoroughly explaining how pairs trading works. Key fundamental concepts that are critical to success in trading pairs are completely absent. There is one chapter that is literally 1 and 2/3rds pages long.
I’m embarrassed for Wiley for even printing this detestable waste of ink. This book is more on the order of the “For Dummies” series of books and even that statement is dubious. The dummies books at least do a respectable job of covering whatever subject that particular book is on. Trading Pairs is a pedagogical tragedy.
Implementing a pair trading strategy can be easy or it can be incredibly complex. You will not learn either method with this book. Do Google research for the background information you need on statistics and finance then buy a better pair trading book but take a pass on Trading Pairs.
Lola Tapia (verified owner) –
Mark Whistler – a ‘licensed securities broker’, is the only qualifier for him writing this book. The book is poorly conceived, with numerous typos and bad grammar. There is little to justify the high price of this book. Given the high price of this work, Wiley could at least have employed a decent proof reader. A lot of it is just fill. Pages of pointless web addresses everybody knows about.. (yahoo, etc), rating of economic stats, and needless chapters about technical analysis, and option basics. If you’re at the level of wanting to arb trade, you have that stuff down cold. It appears hastily put together with little sequence between the chapters. He even admits he changed course close to the publisher’s deadline to include a real live trade (APA/APC), which reads more like a blog. It goes on and on. Do I want to hear about him standing on his desk screaming his head off when a trade got legs and went in his direction? At one point he admits that the pairs trading community focus on ratios, yet he talks about differentials instead. No, I am sure the guy knows how to put on and take off stat arb trades, he just doesn’t know how to teach it. An author he isn’t. He doesn’t offer any kind of structure for the beginning pairs trader to build on. Most of the stuff in the book you can get off the I.net. for free. The one really useful chapter was Chapter 8 ‘Understanding Correlations’ which was written by somebody else,(Steven Price).
There is little to justify this book’s high price. It is not a serious work. Don’t waste your money.
Noa Huang (verified owner) –
I strongly suggest to anyone who is interested in the Wall Street strategy known as “Pairs Trading” to read this book. It is extremely well-written and easy to follow. It also provides clear, step-by-step instructions on how to build and implement your own pairs trade. Overall, I could not be happier with my purchase and I recommend this book to all. Thank you.
Ayaan Henry (verified owner) –
As a trader, I found the book gave a good overview on “Pairs Trading”, but many of the examples, including the “Trading Diary” on Chapter 22 provided little inspiration to someone looking to make sizeable profits out of pairs trades. For example in Chapter 22, titled the “Trading Diary”, after just 30 business days (41 days) the model trade in the book yielded a return of just 1.04%.
Indeed, the basic premise behind the pairs trade, forgetting all the fancy statistics I found is to simply to look at the chart and see if it’s tradeable (i.e has it got a range-bound movement!!!). The secret is to find the charts. To accompany this book you really need some good pairs trading software to find these charts. There’s limited providers but I’m going to try..
Kimber Gutierrez (verified owner) –
I had the occasion last weekend to find a copy of Trading Pairs buried deep in a local bookstore. I was browsing the finance section and have an interest in Hedge Trading. When I saw the title, I immediately picked it up.
What a find! This is an excellent primer for hedge-trading – it lays out the groundwork for novices who may be thinking about Hedge Trading. And then helps the reader use that new knowledge to gain a first-hand, practical, and easy to put into play knowledge of pairs trading arbitrage.
I bought it on the spot, and poured through it that night. To my surprise, the book also went into a fairly deep discussion of more sophisticated trades. Not that a lot of people ask me about hedge trading, or trading pairs, but now, if they do, I’m pointing them out to Whistler’s excellent book.
Cesar Lin (verified owner) –
I had hoped this book would provide a good overview of pairs trading as well as some specific techniques on implimentation. Unfortunately I found the book almost useless for a number of reasons.
Other books on statistical arbritage have received poor reviews here for being too mathematically complex. This book does not suffer from this problem. The mathematics presented are not difficult and in fact are probably a bit oversimplifed. If you know sigma means to add a series then you probably know enough.
The actual narrative is the main failing. Concepts are presented in a very disorganized way, with little continuity between subjects. The writing tortures the reader. Even relatively simple definitions are strained by many parenthetical remarks. The book does do not do a good job of conveying either the essence of the subject or much practical implimentation details.
The book spends quite a bit of time describing how to build an excel spreadsheet to do the calculations. There is a small chapter near the end of the book that contains some good information. However these 4 or 5 pages of information are not worth the price of the book or the torture inflicted on anyone attempting to read the rest of it.
Delaney Graves (verified owner) –
I work in finance and have read a number of books on the topic, I did recently purchase a copy of ‘trading pairs’. I havn’t finished reading it yet, but I can understand it is a little hard to follow but either way it does target the correct people.
I myself am not a math genius so the simplicity works with me, for hardcore quants this book will leave you fairly unsatisfied, though for everyone else it would be more practical.
Luca Schneider (verified owner) –
After reading the reviews, I think people just expect the author provides them a 100% profitable system to make them profitable. Wake up. This book is an easy read and very practical. Try it, twist it and work on it.