Cointegrated Pairs

10 months, 3 weeks agoComments closed

pairs-trading tips

At techpaisa, you can analyse a pair of stocks to see the pairs trading strategy results here. We analysed over 6,500 pairs to find out profitable pairs. Here is a list of pairs which have been chosen among thousands of pairs. These pairs contain stocks which are traded in futures.

Frequently asked questions on pairs trading click here.

Good Trading!

Techpaisa Team.

Modified Pairs Trading System

3 years, 2 months agoComments closed

pairs-trading tutorial tips

We have modified our pairs trading recommendation system significantly. Here is what you can expect in future:

  • Now expect holding period to be about 15 on average and 25 at maximum. In last few days, many recommendations were sent with unacceptable max holding periods, we have rectified that.
  • Do not expect new pairs recommendations everyday. About 1 new recommendation in every 2 trading days can be expected.

Regards,

The Techapaisa Team

Exit these pairs

3 years, 2 months agoComments closed

pairs-trading tips

Note: This article is only for premium users of pairs trading recommendations of techpaisa.com.

We have gone for a complete overhaul of pairs trading system as we were not satisfied with the results. Please exit the following open positions as soon as possible:

  • DLF-IBREALEST (22 Oct 2014)
  • DLF-ASIANPAINT (21 Oct 2014)
  • UNITECH-IBREALEST (20 Oct 2014)
  • DLF-HDIL (20 Oct 2014)
  • MOTHERSUMI-EICHERMOT (09 Oct 2014)
  • MOTHERSUMI-EICHERMOT (09 Oct 2014)
  • ADANIPORTS-BHARATFORG (09 Oct 2014)
  • NIFTY-AUROPHARMA (09 Oct 2014)
  • JPPOWER-NTPC (09 Oct 2014)
  • GLENMARK-AUROPHARMA (08 Oct 2014)
  • GMRINFRA-BHARATFORG (07 Oct 2014)
  • GMRINFRA-SIEMENS (07 Oct 2014)
  • BAJAJ-AUTO-EICHERMOT (19 Sep 2014)
  • APOLLOTYRE-EICHERMOT (19 Sep 2014)
  • SIEMENS-BHARATFORG (19 Oct 2014)
  • TATAMOTORS-MRF (16 Sep 2014)
  • NIFTY-MARUTI (05 Sep 2014)
  • LT-BHARATFORG (01 Sep 2014)

We will exit above recommendations at today’s close prices.

Understanding Pairs Trading Recommendations

3 years, 10 months agoComments closed

pairs-trading tips

Techpaisa sends exclusive pairs trading recommendations to its premium users. If you want to become premium user, register on techpaisa.com and send an email to feedback@techpaisa.com

We will go over a recommendation by using one example. We sent a recommendation on 19th Feb 2013 of buying NMDC and selling HINDALCO.

Here is the recommendation:
Sell NMDC - Buy HINDALCO
Timeframe: 3months
Entry Threshold: 1.5
Target Divergence: 0
Stop Loss Divergence: -2.5
Current Divergence is: -1.45785
NMDC is trading at 137.25.
HINDALCO is trading at 98.85.

Whenever you receive a recommendation, visit the pair page on techpaisa.com. For example, in this case, visit NMDC-HINDALCO page.

How to calculate divergence

When doing pairs trading, you should understand what divergence is. (Read our earlier tutorial on pairs trading.) Simply put, divergence is a function of stock prices of constituent stocks in pair. In the above case, divergence is calculated using the folloing formula:

[hindalco_price - (0.8 * nmdc_price) - mean_error]/standard_error

Mean error and standard error are available on pair page.

Here is an explanation of terms:
  • Time frame is 3 months which means divergence is tracked over a period of 3 months.
  • Entry threshold 1.5 means that take positions when divergence is close to 1.5 (or -1.5) and current divergence specifies the exact divergence at which recommendation was given.
  • Target divergence is 0 and stop loss divergence is -2.5.
  • For this trade, it doesn’t make sense to recommend target prices and stop loss prices as we are dealing with a function of two prices. We suggest that on the pairs page, you follow real time divergence regularly and when the real time divergence hits target divergence or stop loss divergence (stated above for this pair), exit positions.
Other things to keep in mind:
  • Take positions around the above prices. When you will do trades, you will be trading in future contracts of above stocks/indices, so the prices you get will be different from above because future contracts trade at certain premium/discount.
  • Hold positions for a maximum of 40 trading days (in this example). This is calculated using half life of pair. Again, since you will be trading future contracts which have an expiry date, so when entering the trade, make sure expiry day is beyond the expected duration of trade which we have stated here.
  • Maximum number of trading days is specified in each recommendations.

Hope this article clears some doubts about the terms used in recommendations. If there is any doubt, feel free to mail us at feedback@techpaisa.com

Good Trading!

Techpaisa Team.

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