good morning everyone can you advise me how I can implement a stop loss and a take profit algorithm for pairs trading strategy ? thanks for your cooperation regards
Without knowing anything else about your strategy, I would start with exiting a bad trade at 1/3 your expectation of the expected profit. Eg I enter a trade expecting to make 90 cents. Exit with a 30 cent loss.
I've seen approaches where you base your stop loss and take profit on the p-value of the unit root test with some look back period. They discuss it briefly on the MATLAB cointegration and pairs trading webinar. http://www.mathworks.com/matlabcent...n-and-pairs-trading-with-econometrics-toolbox
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thanks to everyone for the answer How can I adapt a stop loss and a take profit on my strategy? the black line indicates the signal for buying and selling the others are the thresholds let me know what you think thanks