15 Trading Tips for Trading Equities Pairs with Pairtrade Finder’s Stock Trading Software

Tip # 3 – Analyze Your RSI Chart

Technical analyst J. Welles Wilder created the Relative Strength Index (RSI) as a tool to measure the strength or weakness of the closing price series of a security over time.  It is a measure of both velocity (speed!) and magnitude (distance travelled) of price changes and can identify stocks that are either overbought or oversold.

The Relative Strength Index is calculated as RSI = 100 – 100/(1+RS). RS (Relative Strength) is usually calculated as the exponential moving average of daily gains/exponential moving average of daily losses during a defined time period.

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15 Trading Tips for Trading Equities Pairs with Pairtrade Finder’s Stock Trading Software

Tip #2 – Price Ratio Analysis

Pair trading often succeeds or fails based on price ratio analysis, which is the core of the system. The maths are simple: in two correlated stocks what is the ratio of stock A to stock B (price A/price B)? The closer the stocks are in price, the closer the ratio will be to 1. For example, if stock A is trading at $55/share and stock B is at $58/share, the price ratio is 0.95. 

Watch For Changes in the Current of the Stream:

Fish swimming

Correlated stocks,

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15 Trading Tips for Trading Equities Pairs with Pairtrade Finder’s Stock Trading Software

Tip #1 – Determine Why the Trade Signals for a Pair Trade Were Generated

So things are going well in your quest become a profitable equity pairs trader.  As a result of following our 3-Hour, 11-Lecture Pair Trading Video Course, you have:

  1. Installed Pairtrade Finder v3.27 on your PC and ensured you have a clean internet connection to access Yahoo! Finance data and keep your My Watchlist pairs updated both EOD and intraday;
  2. Created groups of equities that are in the same or similar industries and sectors, have market capitalizations of at least $1 billion,
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