ArbMakerPlus Cointegration Software

We make ArbMakerPlus - software that finds and analyzes relative value, pairs trading opportunities in forex and equities using Engle-Granger cointegration methodology.

We joined Forex Factory as a Commercial Member after reading a couple of long threads on the forum specifically discussing pairs trading using cointegration.

What can ArbMakerPlus do?

 

1. it has a powerful market scanner capable of running 25-35 complete cointegration scans per second over 3 year ranges for end-of-day data
2. runs intra-day cointegration scans at several time resolutions and observation lengths
3. includes a full back tester with out-of-sample testing and a wide range of test criteria
4. runs user-defined entry and exit signals with live incoming data
5. it establishes the tradability of scanned and filtered cointegrated pairs. Cointegration alone is not always enough.
6. automatically balances both sides of the pair

A full description of all the features can be found on our website at arb-maker.com and there is also a free 14 day trial available. Our documentation is on this page.

We look carefully at all feedback, particularly from forex traders whose requirements differ from those of equity traders. If you decide to try our product we'd love to hear your feedback!

Thanks!

(follow us on Twitter @ArbMaker)

We have created a set of sample strategies for use with ArbMakerPlus. Here we are applying one of them to the example forex pair USDCAD/GBPSEK.

All the sample strategies listed below can be downloaded here and require a simple import via the Operation->Import function. Nothing is overwritten - the strategies are added to the existing database:

1. Direction + Z
2. FX Z range, direction and over reversion
3. Multi1
4. Multi2
5. Multi3
6. Z range and direction
7. Z range and direction w/layer

This USDCAD/GBPSEK example uses the “Multi1” strategy which was built using data visible in both the Z-Score and Bollinger Band charts. The attachment 'usdcad gbpsek.png' shows the residual pattern for the pair since 2009 (expressed in Z-scores). This is, effectively, a spread to exploit.

Multi1 takes a combination of entry points relying on the longer term signal of the Z-chart in tandem with the shorter term signal generated by the Bollinger Band chart (attachment 'usdcad gbpsek bb chart1.png' - zoomed).

Note that how short-term the Bollinger Band signals are is a function of the settings made in the Bollinger Band chart itself. The Bollinger Band settings reflected in the first attached chart were an 88 day average and standard deviation bands of ±1.5 and ±2.0.

Alongside these are the calls the strategy makes on the Z scores of the residuals – the conditions for both sets of chart data must be satisfied for any entry/exit signal to trigger. The attachment 'usdcad gbpsek z chart1.png' (zoomed) also shows that stops and targets are based on the Z score data alone.

All in all, the samples should provide insight and inspiration for strategy designing. This one - in this case - was comfortably and persistently profitable.

Good luck!

(follow us on Twitter @ArbMaker)

Bon Jour!

I'm testing Arb-Maker Pro and I'm liking it very very much, everything is excellent I only would like to merge and interchange pairs in different portfolios easier, click and drop like...

also I've found some odd things when running a back test it seems that some trades are closed with profit/loss=0 (see image)


Cheers!

Bonsoir Joan!

Thank you for the feedback - we are looking at improving manipulation of pairs within and across portfolios. This means a big change in the user interface; and the work would carry us through to the end of summer if we decide to go ahead.

Those trades at zero look like an error in the strategy. If it's one of ours (referred to in the previous post) please let me know and we will double check the criteria. If it's one of yours we can also check it out.

Also, could you tell me what time resolution you used for the GBPCAD/NZDCHF test? We will run it here and see where the problem is.

Salutations,

Rawdon

Thank you that would be great,

It is one of my strategies, it is a simple Z Score strategy:

Y Pair entry at Z<-1,5
stop at Z<-2,5
target Z>0
X Pair entry at Z>1,5
stop at Z>2,5
target at Z<0

Also I've noticed that when I click on delete a strategy and then click cancel, the strategy gets deleted anyway.

I ran the test at 1h resolution but it happens the same with other pairs (Fx and Equities)

Salut!

Hi again Joancb,

What is happening is this: there is a lot of data below your stop loss rules.

On the HCSG/ACGL test, for example, the z-scores at the start of the series stay under -2.5 for 13 observations.

This means that although an entry signal is being generated by the rule:

Y Pair entry at Z<-1,5

because the data point is also lower than your rule:

stop at Z<-2,5

the position it is being exited straight away.

This can be visualised on the 'Z Training Chart' tab (you may have to use the zoom to see the detail).

Thanks for the delete strategy bug. We will fix.

Regards,

Rawdon

thank you for your feedback,

changing the strategy to enter Y when
Z<-1,5 AND Z>-2,5
and X when
Z>1,5 AND Z<2,5

solved the problem

Excellent!

We have released an update this morning which can be downloaded from here. It includes the fix to the bug you kindly reported.

Regards,

Rawdon

(follow us on Twitter @ArbMaker)

ArbMakerPlus analyzes long/short pairs which have positive beta but also does the same for negative beta pairs. Negative beta characterizes long/long or short/short relationships.

Below left is a graph of the forex pair EURSEK/SEKJPY. The pair is notable in 3 ways:

 

1. The beta is -0.569 with a strong R² of 96.9%
2. The absolute value of the beta means the pair will not be dollar neutral: a $1 move in SEKJPY accompanies a drop in EURSEK of only $0.569
3. There is a common currency, SEK, on both sides of the pair

The first point means that this is not a long/short trade because the beta is negative. The signals will either be long/long or short/short

The implication of the second point is that a beta that is also low in absolute terms means the larger dollar half of a pair will cause material swings to the P&L should that beta change significantly during a trade. Although ArbMakerPlus re-calculates beta with incoming data this can still occur. The effect is most pronounced with leveraged instruments: leverage will disproportionately magnify the impact of any deviation from the modeled statistical relationship.

The third point indicates that with a common factor in an FX pairs trade the residuals charts (Z-score and Bollinger Band versions) are effectively presenting a third, single, instrument - a sort of 'triplet' if you like. In this example it is EURJPY that offers the alternative trading option.

These points are visible in the two images below, left. The upper chart is a 1 minute plot Z-score chart of EURSEK/SEKJPY with the lower pane showing the 1 minute price plot for EURJPY. The pairs strategy on the upper chart is the downloadable “Multi1” mentioned in a prior post above. The data ArbMakerPlus used was drawn from IQFeed.

The chart on the right presents addition information on the pair with, perhaps most importantly, the Indexed Prices & Spread graph showing strong negative correlation.

Good trading!

(follow us on Twitter @ArbMaker)

A new production version of ArbMakerPlus is ready! The main changes:

1. A visible version number in the top left corner of the screen.
2. In Trade Items adjust their signal criteria automatically should the cointegrating relationshiop change during the trade - ie when the independent symbol driving the relationship becomes the dependent symbol. We use an Error Correction Mechanism in our algorithm to detect this.
3. An improved PACF graph with the addition of 99% (green) and 95% (red) confidence interval lines on the plot.
4. Additional data-correction controls in the feeds to improve protection against erroneous prices.

This version will install directly over your existing installation and can be downloaded from the Take the Trial page.

We are looking at MT4's API as a way to offer users of that platform the option of extending their current forex feed into ArbMakerPlus. Why pay for another feed if you already have one?

We'd love to hear from you on this (or alternatives) - it will help develop the product.

Get in touch via [email protected] or reply in this space.

Thanks!

We release ArbMakerFX next week at an introductory price of $449.

It includes a feed bridge to run the app under existing MT4 feeds – why pay for a new data subscription if you already have one from your broker?

Check out the feature list and prices of all the new releases right here.

As part of the launch the first 25 ArbMakerFX orders will be upgraded to include the DESP and Kalman filter time-varying beta feature shown on that list.

To take advantage of this offer contact us to join the list of 25 (you’ll receive a number). Once the 14-day trial period is over - and if you go ahead and purchase ArbMakerFX - simply recontact us to get the upgraded license key.

Take the 14-day trial right here!

Designed for forex traders ArbMakerFX comes with a set of functionalities focused on providing the pairs trading tools essential for a relative-value-by-cointegration approach to forex.

ArbMakerFX includes a data bridge linking it to the Metatrader4 (MT4) platform: drive your FX database with MT4’s feeds while keeping a lid on data costs!

Better still, the next ArbMakerFX release scheduled for October will include the option to integrate full signal generation and execution to MT4 making it a complete execution platform for ArbMakerFX.


Priced at an introductory $449. The first 25 purchases receive a complimentary license upgrade to include the time-varying beta methodology tool - get a handle on the volatility of forex with the Kalman filter and Double Exponential Smoothing Prediction model.

We've made a short video to explain the big benefits - particularly for FX traders - of incorporating time-varying beta algorithms in to their pairs trading activities:



Also - thank you to those Forex Factory members who took the time to email with their feedback and ideas! Yes, there are some complimentary time-adaptive tool upgrades left; and yes, if you are still in the 14-day trial we will extend the offer to cover you.

ArbMakerFX can be tried out here and purchased here (still at its intro price).

NB: We changed how the algo handles negative beta in order to be internally consistent: so even with negative beta the software focuses on the spread between the instruments rather than the sign: and to narrow a spread the underlying instruments will have to follow a long/short or short/long process.

...and should be downloaded from the ‘Take the Trial‘ page link.

Changes:

 

1. Forex signals derived from MT4 feeds use bids and asks in the latest price shown in the ‘Tracker’ tab to take account of brokers’ spreads. This prepares the internal structure for auto trading
2. MT4 sets its internal data time-stamps to match the time-zone of the server of which ever broker is driving the feed. ArbMaker can now convert this to UTC (Coordinated Universal Time) in advance of our cross-asset class testing feature
3. Implementation of a comprehensive logging structure in the event of trouble-shooting

Please uninstall your existing version before installing 2.1.25.

We have a monthly newsletter the latest of which has just been released.

Typically we include in each month's release a free scan to demonstrate the software's output.

Within that we also select a single pair for further analysis.

Finally, we also use the newsletter to communicate our latest offers.

You can view and subscribe to the newsletter here.

ArbMaker has just got onto Facebook and created a launch offer to fans of:

 

1. a 4 week license key unlocking all features
2. a discount on any purchase of ArbMaker software for referring a couple of friends to our trial

We want to put our software into more computers and get more engaged with users. If we can do that it will help us make a better product. But the feedback from clients is already not bad - take a look here.

There are some excellent new features coming down the pipe – for example, futures support, MT4 auto-trading and a stunning scheduler module. And the MT4 auto-trading code will be out of beta when the Facebook offer expires on 12 May!

An interactive screenshot highlighting a few ArbMaker trading features and functions. Passive shot below.

Until 12 May we are issuing free 4 week licenses to the full featured demo through our Facebook page.

Tomorrow we release MT4 autotrading integration. Clients received their upgrades today.

There will be a launch offer especially for forex traders...