What to keep in mind when trading in pairs?

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Take a look at this quick checklist of the things you need to keep in mind about pair trading.

Transcript

Here's a quick checklist. First, correlations can change, so manage your risk smartly. It's a good idea to risk only a small portion of your capital on each trade. Secondly, always make use of a large sample size to calculate the correlation between two stocks. And finally, ensure that you implement a mental stop loss for each pair trade. This helps keep emotions out of the trade. Now, it's time to get into the practical side of things, with the straight line equation method. Curious? Head to the next chapter in this module to learn more.

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