Pair Trading Lab Helpdesk & Forum

Pair Trading => Models, Algorithms & Approaches => Topic started by: Max Mayhew on October 20, 2017, 03:44:53 pm

Title: Spread entry question
Post by: Max Mayhew on October 20, 2017, 03:44:53 pm

Hi I am trying to compare brokers I could use pairtrading lab with, im looking at pairs and etf and have a question regarding indicators and spreads etc, any clarification would be great:

Using the ratio model, which ratio (bid ratio or ask ratio) to use as trigger when crossing the upper entry band and which on lower entry band? And the same question for exit bands?

Title: Re: Spread entry question
Post by: admin on October 23, 2017, 03:50:49 pm

Hello,

for example in ratio model - there are actually two zscores the model works with: zscore_bid and zscore_ask

the zscore_bid is calculated from the bid1/ask2 ratio, the zscore_ask is calculated from the ask1/bid2 ratio

then for instance to enter the long pair position, the zscore_ask must cross the entry threshold and to exit the position, the zscore_bid must cross the exit threshold

inverse for the short pair position

I hope that helps...

Karel