Two pair trading is a popular investment strategy used by many investors. It involves buying and selling two related securities at the same time, with the aim of taking advantage of a discrepancy in price between the two. This discrepancy in price usually comes from the securities being different but related – they may trade on the same exchange, be in the same sector, or share the same country of origin. While this strategy can be used to make good profits, it does carry some risks.
That’s where RRG (Relative Rotation Graphs) comes in. RRG is a powerful visualization tool that helps investors to identify two pair trading opportunities quickly and easily. It works by showing the relative performance of securities against a benchmark, typically composed of a benchmark index such as the S&P 500 or the FTSE 100, or a sector or country index.
On the graph, securities are shown as points, with their position relative to the benchmark indicating their relative performance. An RRG contains different characteristics that are used to identify two pair trading opportunities. These include a moving average cross indicator, showing when two securities cross in performance, a trend direction filter, which isolates securities traveling in the same direction, and a leader-follower angle which flags when two securities appear to be converging or diverging in performance.
What makes RRG particularly useful for two pair trading is that it allows investors to look at the relative performance of securities over time, without requiring them to look at individual charts separately. This helps investors to cut down the time spent trying to identify potential two pair trading opportunities. As well as being time effective, it also helps investors to stay ahead when it comes to spotting any potential discrepancies in prices between the two securities.
In conclusion, RRG is a powerful visualization tool for investors that are looking to get into two pair trading. It allows investors to quickly identify potential trading opportunities, and gives them the data needed to stay ahead of the market. Therefore RRG is a useful tool for any investor looking to get into two pair trading.