Learn pairs trading
Short, plain-English explainers. Education, not advice.
- What is pairs trading?Pairs trading in plain English: two stocks that usually move together, a gap that opens between them, and a bet that the gap closes — not on where the market goes.4 min read
- Cointegration vs correlation: why pairs traders care about the differenceTwo stocks can be highly correlated and still drift apart forever. Cointegration is the property that pairs trading actually needs — explained without the maths.4 min read
- Half-life of mean reversion, explainedThe half-life says how quickly a stretched gap between two stocks has typically shrunk. What it measures, how to read it, and why it sets the clock on a pairs trade.3 min read
- How stops work in a market-neutral tradeA pairs trade can lose even when the market is flat. Why a pre-set safety stop on the gap — not on either stock — is part of every pairs setup.3 min read
- Why most pairs stop working (and what benching means)Relationships between stocks change. Why a pair that behaved for years can stop, and how nightly re-testing benches pairs before they publish.3 min read
- How a two-leg trade is placed at a US brokerThe mechanics of a pairs trade at a US broker: margin accounts, borrowing shares to sell short, sizing the two legs, and why the legs go in together.5 min read