Daytrading.no-the homepage of Oddmund Grøtte

EOD pairs by end of August
Copyright Oddmund Grøtte 2004, written 3rd of September 2004

I promised in an earlier article to give an update about my performance with my EOD pairs-strategy (end of day). I have now been swingtrading pairs based on end of day charts for just over two months and I am very pleased with my perfomance. Nothing stellar, but I have made about 10 dollars overall (10 000 dollars with units of 1000 shares, but my size varies). Remember, this is only one of several strategies I am using. Here is a chart of my accumulated profits:

The interesting thing is the slope of the graph, the numbers on y-axis does not really matter. I use about 6-10 times gearing holding on average a pair about 4 days (just an estimate). Since I started on the 27th of June, I have made about 22% on my initial capital contribution (remember this is gearing!). Not bad, really. I have lost money only 6 days. Slow and steady is my motto. I want a rising equity curve (who does not!) with minor drawdowns. Small drawdowns are more important to me than return, actually. With big drawdowns there is no way I can follow my strategy (I get nervous...).

I am not gonna reveal the nuts and bolts of my strategy, but all can say it is a very simple strategy which anyone can do. The entry is more or less fully mechanized, while exit is based fully on my own judgement. I follow quite a few pairs and it is impossible for me to watch all of them closely, but it is much easier to keep an eye on the pair once I am in a posistion. Therefore, I can "optimize" my exit, while it at the same time is much more difficult to "optimize" my entry. After all, I have been trading on the NYSE for three years, and my experience gives me an edge (at least that is what I think...). I simply follow my pairs in Excel and an alert goes off once my entry signal is touched. The biggest problem is to get enough signals so I can keep at least 6-8 pairs on all the time. I want 10 times gearing, but sometimes have to settle with 4-5 due to not enough pairs. The clue is trading as many pairs as possible with small size to diversify and minimize risk. This way it is possible to have a "slow", but steady rising equity curve, given you have a positive expectency.