Best Pair Trading Stocks and strategy overview , earn safe return through this strate
Pair Trading in share market is a very safe strategy to make money, in this strategy only you need to find out pair stocks whose price movement almost remains same over the period of the days together, monitor the price movement and when gap increases in the price of both that time will best time to take a position in the stocks for pair trading.
What will be the strategy?
We will take a SHORT position in stock whose price increased and the same time has to take BUY position whose price decreased, and when the price gap reduces between stocks then that time we will be covering the positions separately.
Traded share quantity value should be almost the same as the below table, which means if TATA MOTORS LTD share quantity is 10 having value Rs. 1580 then you need to take TATA MOTORS DVR share of almost the same value of TATA MOTORS LTD, it will be almost 24 shares will have the value 1560.
So the key point is the value of the amount of both share quantity should be almost the same.
Below a few pairs of stocks having almost the same price movement and gap, you can watch this movement on the technical chart.
HDFC vs HDFC Bank
TATA MOTORS LTD vs TATA MOTORS DVR
DR. REDDY vs LUPIN
Note : Pair Trading best fits in future contracts in the derivatives market, you can hold the short position till the month expiry of a futures contract.
Pair Trading is risky in the intraday market because you will have to squire off your position in a day only.
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