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3. User Guide
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3.3 KaiTrade Extensions
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3.3.7 Pairs Trading
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The pairs trading lets you trade two and threeleg products such as simple pairs Dell-Google and spreads such asthe Crack Spread between crude oil, gas oil and heating oil.The plug-in has the following key components: - CurrentPair Settings - lets you select a pair to trade and set theparameters used while trading.
- CurrentPair prices - these show the current prices of the selectedpair.
- ActivePairs - this shows all running pairs.
These are shown below: The Pairs trading plug-in builds on the multi-leghandling in KaiTrade to provide a convenient way to trade pairs- - Firstcreate a pair by clicking on the New Icon, you will be prompted fora name
- Thenfill in the leg details forboth Legs of your pair.
- Clickthe update on each leg to register your changes - note that the legdata will appear as a Product in KaiTrade using the Pair Name, youcan save these.
- Tostart trading the pair, enter the quantity in the trade box andclick Activate. If you have checked the PriceTracker box then thequoted legs will track the market to maintain your spread atthe current price - unless the market moves to fill the leg,
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The toolbar lets you control pairs trading. |
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'When you click the Add new pair button you willsee the dialog shown above. You can use this to set the products that youwant to trade and to set their side. Notice that the name is generatedautomatically. |
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This panel lets you set the basic details aboutthe pair you want to trade: 
Field | Description | PairName dropdown | Lets you select a pairtrading strategy to work with. | Qty Convention | Describes the units ofthe Qty specified - in this release this must be Shares | Price Convention | Specifies how the pairs (and implied prices arecalculated) in this release this must be Pairs | Level | A price offset that is applied the prices impliedon both sides of the pair. This prices is specified inLevelUnits(the tick size) | OrderQty | The order placed into the market - this alsocontrolled by Max Slice and available size in themarket | Max Slice | The maximum amount shown the market - if theOrderQty is greater than the MaxSlice then multiple sets ofpairs will be traded. | Hang Allowance | The maximum qty that is allowed to be outstandingon leaning legs over a set of pair trades - if the handallowance is exceeded then the particular pair is suspendeduntil fills occur to reduce the outstanding order size belowthe hang allowance | Price Tracker | If enabled(checked) then the system willautomatically adjust price and volume of the quoted leg basedon the price of the opposing leg and the size available inthe market. | | |
The other fields control legging.
Field | Description | Number of payups | If a leg is not filled after the a quoted(lead)leg is filled, then the system can adjust the price of nonfilled legs(a payup) - the number of payups that will be doneis set here. | Payup interval | The time interval between each payup - if thelead leg is filled after the interval the first pay up willoccur, then the second and so on. | Payup amount | The amount added orsubtracted from the non-filled legs | TimeToMarket | If this is greater than 0, the time inmilliseconds before a non-filled leg is resubmitted as amarket order. |
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The system displays the real time price of theproducts in the selected pair. It calculates in implied price basedon the price calculation, in the case above this is Pairs sothe BidPrice shown on the first row is -76 (Bid Price AAPL - BidPrice DELL) similarly for the AskPrice. If you set the Level to -77 and have level unitsof 1, you can see that the implied prices based on the other legshown on rows two and three correlate to the actual prices. When you Buy or Sell the pair the quoted productwill be sent to market using a price based on off the other legafter the Level has been applied, if you check the Pricetracker then the price will be automatically updated. |
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You can edit the individual leg details byclicking the Edit buttons.
Name | Description | Values | Mnemonic | The product you wantfor a leg | KTSIM:ZZ:DELL:ESXXXX | Leg Account | The account used totrade the leg | Depends on yourbroker | Side | Side of the trade usedwhen trading the leg | Buy, Sell, Short | OrdType | Order type used whensubmitting the leg | Market, Limit | Qty | Leg quantity - the actual traded amount is theQuantity when trading the strategy * the leg Qty | | PxOffset | The offset from the Best Bid or Best Offer thatyou want the trade to be places when the OrdType is a Limit -Market orders do not have a price | A number of ticksizes | TickSize | TickSize of thecontract | | Multiplier | A multiplier used for price generation, forexample to match units of measure where on product is ingallons and the other say in barrels (oils) | | Damper | An amount that is used to control modify ordersubmission - only when the price of the underlying haschanged by an amount greater than the Damper are edits toworking orders made | A number of ticksizes | Quoted | The leg will be traded as soon as the pairsstrategy is run. otherwise a leg is traded when the leadingleg has filled | |
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The system provides a view of al the pairsrunning. |
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You can view a set of videos that show how to usethe pair trader: - How touse the pair trade - general overview:http://www.screencast.com/t/NzYwM2QzN2
- Tradingpairs: http://www.screencast.com/t/MTg4MWM4YWM
- How tocreate a pair: http://www.screencast.com/t/NjAxZTNk
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