Pair Log Ratio Divergence

Pair Log Ratio Divergence is a professional indicator designed for Pairs Trading.

It measures the divergence between two financial instruments using the logarithmic price ratio instead of simple price differences.

The logarithmic approach allows accurate comparison of instruments with different price scales while providing a stable equilibrium model.

The indicator calculates:

  • logarithmic price ratio
  • dynamic equilibrium line
  • current deviation from equilibrium

This makes it possible to identify statistically significant divergence between correlated instruments.

How it works

The indicator calculates:

Divergence = Log(Symbol2 / Symbol1) − Average(Log Ratio)

The equilibrium is calculated over the selected EquilibriumBars period.

Values close to zero indicate that both instruments are trading near their historical equilibrium.

Large positive or negative deviations may indicate potential mean-reversion opportunities.

Trading Signals

Positive Divergence

SELL Symbol2

BUY Symbol1

Negative Divergence

BUY Symbol2

SELL Symbol1

Features

✔ Professional Pairs Trading indicator

✔ Log Ratio Analysis

✔ Dynamic Equilibrium Calculation

✔ Adjustable Entry Threshold

✔ Information Panel

✔ Alert Notifications

✔ Supports Any Symbol Combination

✔ Optimized Calculation Engine

Inputs

Symbol1

First instrument.

Symbol2

Second instrument.

EquilibriumBars

Number of bars used for equilibrium calculation.

EntryThreshold

Signal threshold.

ShowPanel

Show information panel.

ShowSignals

Enable alerts.

Recommended Timeframes

M15

M30

H1

H4

Recommended Symbol Pairs

EURUSD / EURCAD

EURUSD / GBPUSD

AUDUSD / NZDUSD

EURJPY / GBPJPY

USDCHF / EURUSD

or any highly correlated instruments.

Disclaimer

This indicator is an analytical tool designed to measure statistical divergence between two instruments.

It should be used together with proper money management and additional market analysis before making trading decisions.


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