Search This Site

Michael Bigger is an investor and a trader who has been involved with trading technologies for more than twenty years. In 1992, Michael joined Citibank as head trader of U.S. single-stock derivatives, where he managed a $5 billion portfolio of equity derivatives. In 1998, he joined D.E. Shaw & Co., L.P. to trade the U.S. equity derivatives portfolio. (More)

« Verifone Spread Gaining Momentum | Main | Early Holiday Gift to Our Math Geeks »
Saturday
Dec012012

Professional Traders: New Trading Tool

I want to share with you a trading tool that I built in MATLAB.  I find it quite useful for backtesting a statistical arbitrage strategy on a particular spread.  For example, take the spread 4*FDX-5*UPS.  Here it is in Spread Analyzer.

The code takes inputs like entry levels, exit levels, and stop-losses.  The output is a graph that looks like this, where the blue line is the level of the spread, the green line is a moving average, and the red line is the cumulative P&L of the strategy: 

Using this tool allows you to test your parameters to see which entry levels, exit levels, and stop-losses as well as which lookback periods perform the best on each spread.  It can also be embedded in a script so you can run it on a portfolio of spreads for the same parameters.  This would allow you to analyze your parameters quickly over a larger group of spreads.

What do you think?  Would you want to have access to this tool? Anything else you would want this tool to perform?

Written by Jennifer Galperin.  Follow me on Twitter and StockTwits 

PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (3)

Could you build this on Python? This looks really cool.

December 3, 2012 | Registered CommenterEric Gong

Hi Eric,

Yes, it can be build in Python. We are asking because we are thinking about web enabling the tool and we would like to know what our users of Spread Analyzer would like to see.

December 3, 2012 | Registered CommenterMichael Bigger

I think it would be very useful to have. Need to be careful about over fitting but still very helpful.

December 4, 2012 | Unregistered CommenterDave

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>