Building Pairs Trading Strategy with PHI 1’s Multi-Symbol Strategy Creator

Building Pairs Trading Strategy with PHI 1

Most trading tools in India let you perform price-series analysis on one security in a particular strategy.

PHI 1 allows the price analysis of multiple securities in a single strategy and thus allows the construction of advanced strategies like pairs-trade.

Pairs Trading is a trading strategy that matches a long position in one stock/ asset with an offsetting position in another stock/ asset that is statistically related. Pairs Trading can be called a mean reversion strategy where we bet that the prices will revert to their historical trends.

This video shows the ease with which a pairs trading strategy can be constructed using PHI 1.

In this example, data [0] refers to the TCS price series, and data [1] refers to the INFY price series.

Bollinger Bands are applied on both time series in the Init Code.

Step Code allows you to define various scenarios – going long on one security, and short on the other at the same time, as the price-series of any security breaches its band and square-off the above pair trade once its reverts to baseline or breaches the opposite band.
Any long/ short trade combination can be constructed which captures the divergence and convergence between two statistically related securities.

Another advanced iteration could be to apply Bollinger band on the ratio between the price-series of two securities and capture the divergence of this ratio through movement outside the bands and convergence through movement towards the mean. Our PHI 1 editor allows you complete freedom to conceive and implement your take on this classic multi-symbol strategy that helps you maintain market neutrality.

READ :   5 common mistakes every trader makes and how you can avoid them

Once you run the strategy, you can monitor the paired trades and the performance of the strategy as well.

Tagged : / / /
0 Shares
Share via
Copy link
Powered by Social Snap