Bit busy today, will reply to other posts in detail later. Yes we can take this HCLTECH-TCS trade today, Actually I am planning to track next 10 pairs, I am currently holding the 3 pair trades posted earlier so will not take this trade, but we can track it.
As I have posted in the last few posts I am using a slightly different approach now for positional trading, this is more easy to trade and lower risk. If we are taking postions in futures where the lot size is big it is better to take both the trades at the same time. However the approach I am currently following is to average the cost of the stocks by buying them in increments of 10K.
Steps for HCLTECH-TCS:
1. Keep a Buy SL order for 9 HCLTECH above the 1st 15 min candle. (This will be CNC order and we will carry it till mean reversion)
2. Keep a Sell SL order for 4 TCS below the 1st 15 min candle. (This will be MIS order and will be closed at around 3pm)
3. We dont make any adjustment at eod.
4. In the evening we will check the zscore for the pair again. If it is still lower than -2.0, then we will repeat the steps 1 & 2 in increments. i.e
Keep a Buy SL for another 9 HCLTECH stock CNC order (If this get executed we will have 18 stocks by eod)
Keep a Sell SL for total 8 TCS (4+4) MIS order which will be closed by eod.
What we are doing basically is that we try to average the price of stocks in increments as we know that the pairs will eventually mean revert.
And to keep the pairs hedged, we short the other stocks daily.
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