The indicator plots a curve of the difference between the values of two trading instruments (currency pairs).
The purpose of the indicator is to observe the processes of divergence and convergence of the values of two trading instruments. The results obtained can be used for trading strategies of statistical arbitrage, pair trading, correlation, and others.
The indicator is attached to the chart of any trading instrument. In the input parameters, the names of trading instruments are specified, the difference of values of which should be displayed by the indicator. The trading instruments of the chart and the instruments specified in the input parameters can be the same, or they can differ. In any case, the calculation will be performed for the instruments specified in the input parameters. The indicator is used to judge the discrepancy between the values of trading instruments. A signal to enter the market can be either the maximum divergence or the minimum. In the first case, deals are set in the direction of the convergence of trading instruments. In the second case, trades are set in the direction of the divergence.
- Instrument 1 - name of the first trading instrument (for example GBPUSD, GBPUSD_i, GBPUSD_m, etc);
- Instrument 2 - name of the second trading instrument (for example EURUSD, EURUSD_i, EURUSD_m, etc).
Features of using the indicator
When opening and closing deals, you should use the extreme values filter. It is advisable to open the opening within a 5% range of extreme values. Trades should be closed earlier, approximately in a 15-20% range from the extreme values of the opposite direction.
The indicator can be used both independently and in combination with other technical analysis tools, providing trading according to various strategies.
It is possible to install two indicators on one chart at once with a different set of trading instruments.
The indicator can be used in manual trading and when creating automated trading systems.