Pair Trading Spread
The Pair Trading Spread indicator visualizes moments of two instruments' convergence (collapse) start. Signals are not delayed so you can timely enter and exit the market.
This indicator is developed for pairs trading and creation of your own trading system based on difference in movements of trading instruments.
Unlike most of multi-currency indicators, the Pair Trading Spread indicator does not load CPU, calculations are immediately performed, it is non-redrawable.
Settings of every currency pair provide better adjustment of the indicator. "Mirrored" pairs can also be displayed. Instruments' volatility is taken into account. Lots of pairs being traded are visualized.
How to use the indicator? It's easy! Wait until the histogram column becomes red. This indicates beginning of instruments convergence. Open trades when a new bar appears and look at the indicator's lines. If the blue line is located above the green one, sell the instrument corresponding to the blue line, and buy the second instrument. In case of mirrored pairs buy or sell both instruments depending on a position on the histogram (sell if above zero, buy if below zero).
Close trades if the histogram crosses the zero line. Or trail total equity to the bitter end in case of a profit.
Setting the Indicator
The indicator can be attached to any instrument's chat regardless of those specified in settings. If any instrument does not have a quote, the history of quotes will be downloaded automatically.
- symbol1 - first symbol name;
- fast1, slow1 - parameters to set symbol's line display (the line must repeat the symbol's behavior on the chart as accurate as possible);
- symbol2 - second symbol name;
- fast2, slow2 - parameters to set symbol's line display (the line must repeat the symbol's behavior on the chart as accurate as possible);
- reverse - set to true in case of "mirrored" (negatively correlated) pairs;
- volatile_period - ATR period for considering volatility and lot of the second symbol relatively to the first one.
Each instrument pair requires its own parameters. Further optimization is not required. Or it might be necessary within a small range from already adjusted parameters.
Important: MetaTrader 4 cannot test a multi-currency indicator, so there is a version of this indicator for Metatrader 5 which can be tested. You can find it here.