Can a mean reversion system trading 1 pair have 2 sells or 2 buys?

AI & Machine learning
1

Can a mean reversion system trading 1 pair when opening can it have 2 sells or 2 buys or it should always have a buy and sell then it closes the respective open orders when it reverts.

2

Hello Jane,

For an asset pair of A and B, the amount of instrument B to purchase or sell for every unit of instrument A is defined by the hedge ratio. You can place as many open orders per asset as you wish as long as it maintains the hedge ratio. I see you have already enrolled in Mean Reversion Strategies In Python course. You can learn and practice the concept of hedge ratio here.



Hope this helps!

3

So its ok if i have a hedge using 2 buys,  1 buy of aset A and 1 buy or asset B?

4

Hello Jane,



Can't confirm this without completely knowing what you are trying to hedge? Are you trying to pairs trade assets A and B or do you want to hedge some asset or portfolio with asset A or asset B or both?. As you have mentioned, if you are hedging, you can use one or many assets to hedge.



Hope this helps!

5

Im hedging 2 assets but Im getting 2 seells and at times 2 buys is this OK? or should it lways be opposing trades? aka 1 buy 1 sell

6

Yes, Jane, that's normal and you can close those open positions when the price reverts.



Thanks

7

Thanks!