Pair Trading Lab Helpdesk & Forum
Pair Trading => Technical Details => Topic started by: Victor Donos on December 25, 2013, 07:24:40 am

Hello, thank you very much for all the work u are doing!!!
I have 1 question, how can i get the Thresholds + delta code indicator? or the algoritm that is composed?
Thnks a lot
Best regards
Victor Donos

Hello Vitor,
it is actually based on a Bollinger Bands indicator applied on the price ratio. You get both delta and thresholds just by subtracting the price from the central Bollinger Bands series.
We will disclose algorithms for both pair trading models during the January.

Hello Admin
I am back to your website.
so you disclose algorithms???
best regards,
Victor

Hello,
unfortunately we were busy by creating the new website and doing huge changes to the code, so we did not have time to prepare a nice documentation yet (with formulas and example graphs).
But for the ratio model it is really simple:
 you calculate ratio of stock prices: R = X/Y (where X is the price of the first stock, Y is the price of second stock) for each close price
 then you apply a Bollinger Bands indicator on the ratio series R
 you enter position whenever the R crosses the upper or lower band and you exit when R crosses the "zero" line
More about Bollinger Bands: http://en.wikipedia.org/wiki/Bollinger_Bands
We will make detailed documentation later, with formulas and graphs.