Crypto Pairs Trading - How Traders Have Been Profiting In Good Times and Bad

70%+ of success emails I receive are related to traders making it using Statistical Arbitrage in Pairs Trading. After 5 years of using different tools in the Crypto Market, I think it's time to look back and see what has not only worked, but also what all the terminology means and how it applies to the theory. I know a lot of folk are new to this and might appreciate the insights for beginners.
This is just from my own research driven obsession in trading whilst developing Crypto Wizards tooling for traders over the last 5 years. I will not make you rich and if you are not experienced, you can lose money with any strategy including this one.
In this video, we will cover:
- Cointegration
- Hedge Ratio
- Half Life
- ZScore
- Spread
- How to find opportunities
Website: cryptowizards.net
Music:
Almost in F - Tranquillity by Kevin MacLeod is licensed under a Creative Commons Attribution 4.0 license. creativecommons.org/licenses/...
Source: incompetech.com/music/royalty-...
Artist: incompetech.com/

[@juliocarvalho9790]

Nice to see Tom Hardy getting into Statistical Arbitrage

[@0xAlpine]

love this channel - keep up the good work!

[@jimlee5626]

Great info. I'm diving in for more knowledge. Thanks and well done.

[@TheTurlututuchapeaup]

This channel is gold

[@jacobosanchezluna9395]

Hello Shaun, I am very thankful for your great job; I would like to filter pairs using your tool, and get alerts of chosen pairs using Tradingview; for that I am thinking about using Z-score indicator, but I need to adjust the Z-score indicator to follow your calculations, may you tell me how many periods and mean type (probably SMA) you are using in your platform to get Z-score values? I will work in hourly time frame as you suggest. Thank you very much.

[@mad21978d]

Love your work Shaun.

[@DavidHarperMusic]

Excellent. Thx

[@ozfrox]

Thanks for your analysis, very helpful! What about trading pairs using a momentum strategy, longing strong coins and shorting weak ones, can't find resources on trading styles like this.

[@Pazmin]

Hello! Question, for 5 minutes interval, what period you use? 1 month too? o your reduce ur period for example to 1 week?

[@TheJakeRobinson]

Good stuff!

[@marksukhinin7622]

Forward testing tool would be extremely valuable for sure

[@CryptoWizards]

Completely Mark. Am also working on a DYDX bot codebase/course for automated forward testing in a decentralised way. FTX was no joke.

[@navketan1965]

Sir, In forex pairs SPREAD TRADING do you recommend use of CCI (say on 4H chart--cci 7,cci 14, cci30,cci50 values & add all these values on each pairs to spread & compare overpriced/underpriced leg).The pairs got to have correlations of at least 90%(say aud/usd &nzd/usd--aud/jpy &nzd/jpy--eur/jpy & gbp/jpy--gbp/aud & gbp/nzd etc.).Sell the overpriced & buy underpriced. This would give trader starting edge, staying power, size choice & risk control. You would be comparing deflection of prices summed up on multiple time frames(added up/robust) for asset A & B. Your wisdom is appreciated..

[@TheTradingParrot]

Very cool video

[@rakishman1313]

i d love to know what the half life for your strategies are . The pair mentioned above does not seem to hold their cointegration and thus isnt stationary in the longer run . What would be the average/typical time period to assume this cointegration would hold?

[@marksukhinin7622]

Hudson&thames channel has a lot of sophisticated videos about statarb. Definitely some great ideas there about how to enhance pair trading approach

[@CryptoWizards]

Agree 100%. Those guys make me look like a 5 year old compared to their knowhow. It was actually them that I learnt a lot from.

[@jordanfordham2284]

Great content as always, really helpful! Could you make a video on position sizing and risk management techniques (Stop loss, Dollar cost averaging, scaling in/out...) with respect to stat arb as its a subject i have found very little information on even though it is so important. Thanks again for all your hard work!!

[@CryptoWizards]

Great suggestion. I'll work on this. For time being, check out the "Kelly Criterion" in terms of position sizing. There are so many ways to optimise, feel forward testing different strategies and reviewing what worked best may make the best video on this.

[@smokescreenOG]

how profitable can pairs trading be with leverage added approximately if its showing let's say 1.5 over a period? and with hedge ratios, do you have to enter your positions based on that metric, so if hedge ratio is 2, you enter one asset at 2x and one at 1x ratio?

[@Longjk196]

Same question

[@hideraeood5268]

Thanks

[@CryptoWizards]

Anytime

[@barnabaschimezie1775]

🔥

[@bjorninlalaland5782]

Hello Shaun, I just enrolled & doing the Udemy course. Where can I find the Discord channel? Best regards!

[@WasimTribak]

also how do you actually put it into action?

[@CryptoWizards]

Depends on your strategy. Usually by checking each hour or so and placing trades you feel look promising. Others just skip all that, do the course and code their own bots.

[@WasimTribak]

what if the Zscore is minus?

[@CryptoWizards]

Go long on ticker 1 and short on ticker 2 and then the other way around if ZScore is positive

[@WasimTribak]

you should add an zscore/spread alert to the platform also

[@CryptoWizards]

Completely agree. Working on it.