Battle of Tech Titans – AAPL vs RIMM from Hewison

May 17, 2009: 12:37 AM CST

Adam Hewison of Market Club released an intriguing video discussing pairs trading and the ‘battle’ between Research in Motion (RIMM) and Apple Inc (AAPL).


(Clicking the image takes you to the Adam’s video page)

Entitled “Battle of the Titans – Apple vs RIMM,” Adam takes a moment to discuss the Blackberry vs the iPhone, then moves into discussing their charts (along with relative strength), and finally discusses a possible “Pairs Trading” strategy.  Most new traders never think about Pairs Trading and that’s fine, but some traders are instantly drawn to it due to the lower risk it offers.

Adam introduces the video by saying:

“It is the battle of the tech titans as both RIMM and APPL battle for the smartphone market share. Although Research In Motion is a well established tech giant as the creator of the BlackBerry, they may have hit a wall with Apple, Inc.’s launch of the phenomenally popular iPhone.

This tech battle may create a way to trade these markets with a lower risk. During this latest rally, RIMM did not perform well, nor were the changes in price as exuberant as the shares for AAPL.

I am looking for the general market to show weakness through the next week… with that said, I expect to see RIMM slide faster than AAPL. It may be conservative trading strategy to buy Apple and short Research In Motion. Take an equal amount of money for each market and buy a corresponding number of shares to balance the positions and decrease risk.

This is what I call “pair trading.” You’re looking for the percentage change in the market between RIMM and APPL to move in Apple’s favor no matter which direction APPL or RIMM head.

In my new short video, you will learn why I came up with this strategy and why it may offer a low-risk trade in the current market environment.”

As always, thank you to Adam and staff for these educational videos and the lessons we learn from them. 

5 Comments

5 Responses to “Battle of Tech Titans – AAPL vs RIMM from Hewison”

  1. Anonymous Says:

    I just have to ask a question.

    Is it normal to expect 50% of your trades to be losers?

    I have been testing strategies for months now and can't for the life of me come up with anything better than that.

    This is immensely frustrating. I just don't understand why this is so difficult for me. I made deans list every semester, never got a C. But I can't get anywhere with this.

  2. Corey Rosenbloom, CMT Says:

    One of the most surprising facts about professional trading us that
    pros can have shockingly low win rates – especially Trend Followers
    who may have win rates near 20 or 30% but their winning trades more
    than make-up for the losing trades. 50% is not uncommon.

    It's a balancing act betwen the two major types of Edge:

    1. Accuracy Edge (you win more than you're stopped out aka greater
    than 50%)

    2 Monetary Edge (you make two to three times or some larger multiple
    of profit per trade vs dollars lost on losing trades.

    Balance these two factors and you can be consistently profitable.

    Kill losing trades before they become too large and allow yourself to
    play for large targets at times.

  3. Anonymous Says:

    Thanks Corey,

    Thank you for taking the time to respond. That was written at 4am last nite when I was very tired and probably should have been asleep.

    I've been giving up on ideas because their success rate isn't much better than 50%. But it has occurred to me that maybe what I need to do is to keep stopping out losers quickly but find a way to stay in winners.

    But if that were the case it almost makes entries seem meaningless. I can't get my head around that, it doesn't seem right. Just thinking aloud.

    I have come to realize that trading is not a get rich quick scheme, especially if you are trading a small account. I think this is more about money management than anything else. There will be losing streaks that will wipe out all your winnings if you aren't careful. I have heard many stories of people who made large returns for a year or two only to lose it all when the market changed directions. I have a coworker who quit his job to “trade for a living” in 1999 and had to go back to work in 2002 because he had lost all of his winnings. He says that he thought he had the market figured out when in reality he was just buying stocks in a bull market, it wasn't him at all. My cousin's portfolio was up 250% in spring '07 from investing in uranium stocks, and by last year had gone negative after the sector crashed. This trading is an fascinating business, that's for sure.

    Also, just curious… why do you choose to day trade? It seems to me that most traders prefer intraday trading. One person told me he does it because it's easier to predict the next 60 minute move in an index than it's next 60 day move. I can see that point. Why do you prefer it?

  4. Jared Says:

    Yes now looks like a good time to enter this pair trade if you have a fundamental bias, long AAPL – short RIMM, spread is at a 50 day low. Ive plugged this pair into our proprietary software for analysis, doesn't look too bad, il be keeping an eye on it,

    Regards.

  5. Jared Says:

    Yes now looks like a good time to enter this pair trade if you have a fundamental bias, long AAPL – short RIMM, spread is at a 50 day low. Ive plugged this pair into our proprietary software for analysis, doesn't look too bad, il be keeping an eye on it,

    Regards.