Strata – How to Place Orders

Having a great set of strategy rules is an important component of being a profitable trader. Just as important, however, is that you execute the strategy rules with precision. If you diverge from the rules, either intentionally (discretion) or unintentionally (mistakes), then it’s likely that your results will differ from ours as well. 

For the Weathervane strategy, good execution is primarily a matter of placing the correct entry and exit orders in a timely manner. It doesn’t matter whether you’re new to trading or very experienced. It doesn’t matter which broker you use. It just matters that you use the information from the Signal Table to place the right trades at the right time. If you ever have questions, we’re happy to answer them. 

Weathervane is a pair trading system that selects one of two possible trading symbols. The evaluation of the preferred symbol is done each day after the market closes, with signals published on the web site later that evening, US Pacific time. Once the signals are available, you can place your orders any time before the next market open.

In all cases, when the strategy rotates from Symbol A to Symbol B or vice versa, you should place both the buy order and the sell order at the SAME time. That way, the capital released by selling the old shares can be used to purchase the new shares. 

Also, unless you have sufficient spare cash in your account, you MUST have a margin account to place these orders. Even though you are not borrowing any money, a brokerage requires a margin type account if you want to reuse your cash on the same day that you exit a position. 

The backtest results were generated by entering at the open.  Cesar uses market on open (MOO) orders to enter his trades on InteractiveBrokers. 

Another common question is how to enter trades that are already open. Cesar takes one of two approaches. The first is simply enter the trade. It does not matter if has been held one day or one month. Just get in. The second method is enter half the trade now and wait a week to enter the other half. This I will do if the market seems really over-bought. A third option is simply for new entry signal. The potential issue with this is it could be weeks before this happens.

Good Quant Trading, 

Cesar & Steve