Pairs Trading

1. Overview

Pairs Trading is a strategy that exploits the lead–lag relationship between two correlated assets. Instead of trading a single symbol in isolation, the strategy uses the price behavior of one asset to anticipate movement in another asset.

2. How It Works

• The system continuously monitors both assets
• It detects movement or momentum shifts in the leader asset
• If a valid signal is confirmed:
  • A trade is placed in the same direction on the lagging asset
• The position is held until:
  • Target is reached
  • Stop loss is triggered
  • Or exit conditions are met

3. Pairs Trading Block

The Pairs Trading Block enables execution of this strategy logic.

How It Operates

• Input Symbol A → Signal Generator
• Input Symbol B → Trade Execution
• Strategy logic is applied using Symbol A data
• Trades are placed on Symbol B

6. Explorer Tool

The platform provides an explainer tool to enhance usability:

You can:

• Run a strategy explainer to understand logic flow
• View how signals are generated step-by-step
• Inspect leader–lag relationships visually
• Copy the strategy configuration for reuse or modification

7. Key Advantages

• Early Entry Advantage: Capture moves before reaction
• Market Efficiency Exploitation: Uses temporary inefficiencies between correlated assets
• Non-random Signals: Based on observable inter-asset behavior