This trading system screens the universe of Russell 3000 stocks for matched stock pairs to go long and short. In this screening process, the automated computer system uses proprietary quantitative methods assembling 120,000 possible reasonable pairings of stocks in the Russell 3000 Index. Of these possible pairings, only a handful meet our strict criteria that decide which stock in the pair to go long and which stock to go short and when. When such a trading signal is generated, we immediately trade it with market orders, but you could use limit orders so long as you get filled within the same day.

Our stock pairs trading signal consists of simple instructions of the kind:

Buy 1000 shares of EQR, while
SIMULTANEOUSLY selling short 575 shares of VTR

You need to implement this trading signal by buying and selling both legs of the matched stock pair. You may execute the paired trading signal within a few hours of the system issuing the signal. It is very important to implement the two stock trades together on the same day, so as to derive the full benefit of the arbitrage potential in the stock pairing.

We will also provide you the closing signal on the trade pair, usually within a few days. Again, you must get out of the two legs together when your receive our exit signal.

Since there is plenty of time to implement the two trades, you can go about your business or hobbies without being glued to the financial markets. All you need to be able to do short selling is to open a margin account with your discount stock brokerage.

Or, to keep things really simple, automatic trading can be done in your brokerage accounts if you choose Autotrade in C2's systems.

I have been using this system successfully for 3 years before launching it publicly on C2. As you can see from its performance since July 22, 2010 on C2, the system has a very low drawdown. Following the trade signals given here is as good as parking your money in cash, while getting far better annual returns than cash which yields 0% in 2010. This has been achieved by designing this system to be quantitatively uncorrelated to the broad stock market. Currently, the correlation shown is 0.01, which means this system behaves almost independently to what the broad market does. Whether the broad market zigs or zags, this system clocks in its profit diligently.

The profit growth will appear to be painfully slow, especially in comparison to those futures based systems that seem to attract the most attention as "Hot Systems" on C2, but be aware that those systems will easily give you sleepless nights with drawdowns of more than 15%. this system's drawdown being less than 5%. Our motto is: the slow and steady win the race. We would rather be steady even if we are slow in increasing the equity curve shown. We believe in showing substance, and letting the sizzle-masters delude the crowds by creating multiple systems or with marketing hype. We only have one system which works well.

The system's "capacity" is very high, since the system only sifts through the very liquid US stocks in the Russell 3000, and they offer a huge amount of liquidity. This system's capacity should not be impacted by more participants being drawn in.

You can get more details on my instaBlog at

http://seekingalpha.com/author/rajeev-seth/instablog

and at my website on Quantitative Investments at:

http://www.beatindex.biz

Please feel free to email me at [email protected] if you have any questions or concerns before you subscribe to this system.