Excalibur Pair Trading Primer #1 - Backtesting

Excalibur Pro is all about giving you investing ideas through an advanced research tool. Whether you like traditional technical analysis or a more sophisticated momentum identifier (Markov) or correlation - we give you the capability to quickly run ideas through our software so you can make decisions, quickly.

But that's not all.

We have added a pair-trading section that gives you access to three popular statistical arbitrage strategies that the big boys like to use - Cointegration, Correlation and Distance. We created an interface that lets you discover pairs that are eligible for pair trading (stationary), and when they are, you can backtest strategies to see which might afford the most profitability for you. There are no guarantees for profit on every trade right away (when we figure that out, we aren't going to offer that to anyone else...) But in the meantime, this section lets you make informed decisions on a strategy that - as long as the instruments meet the various stationarity tests - will lead to a profitable trade. The question is how long that takes and how long you are willing to wait for it. But that's what the backtest helps you understand.

This video walks you through the basic backtesting process for a "Distance" trade. As we note in the video, for those who have access to Excalibur Pro, check out our FAQs to better understand the formulas that we use. Our next video will show you how to use the "Trade Simulator" so you can monitor a trade after you have backtested it.

And if you don't have access to Excalibur Pro yet, send us a trial request at:

https://excaliburpro.net/about