diff --git a/Indicators/MyIndicators/Quant/PairsTrading_Pro.md b/Indicators/MyIndicators/Quant/PairsTrading_Pro.md index c35ca0b..da30b52 100644 --- a/Indicators/MyIndicators/Quant/PairsTrading_Pro.md +++ b/Indicators/MyIndicators/Quant/PairsTrading_Pro.md @@ -1,69 +1,89 @@ -# Pairs Trading Cointegration Pro (Indicator) +# Pairs Trading Cointegration Pro Suite (Oscillator & Bands) -## 1. Summary (Introduction) +## 1. Summary -The **Pairs Trading Cointegration Pro** is an institutional-grade, high-performance separate window statistical arbitrage oscillator. While traditional pairs trading methods in retail trading rely simply on price correlation (which is highly unstable and prone to terminal spread drift), `PairsTrading_Pro` measures true **cointegration** using a dynamic rolling Ordinary Least Squares (OLS) mathematical engine. +The **Pairs Trading Cointegration Pro Suite** is an institutional-grade, high-performance separate window statistical arbitrage trading suite comprising two advanced indicators: `PairsTrading_Pro` (Z-Score separate window oscillator) and `PairsTrading_Bands_Pro` (Main-chart overlay bands). Based on Modern Portfolio Theory and econometric cointegration, the suite decomposes the pricing relationship of two correlated assets into a stationary, volatility-normalized spread. -The indicator dynamically calculates the rolling Hedge Ratio ($\beta$) and Intercept ($\alpha$) between any two assets (default: Brent vs. WTI Crude Oil), extracts the volatility-normalized spread, and plots a stacioner Z-Score as a **5-Zone Thermal Color Histogram**. +While traditional retail pairs trading methods rely on simple price correlation (which is highly unstable and prone to structural drift), the `PairsTrading_Pro` suite utilizes a dynamic rolling **Ordinary Least Squares (OLS) mathematical engine**. It dynamically calculates the rolling Hedge Ratio ($\beta$) and Intercept ($\alpha$) between any two assets (default: Brent vs. WTI Crude Oil) to extract the true stationary spread. -Featuring **VWAP-style Anchored Resets** (Session, Weekly, Monthly, and Custom Session), the indicator can completely isolate intraday/intraweek price relationships from overnight gaps and illiquidity, making it the ultimate tool for active statistical arbitrage. +Featuring **VWAP-style Anchored Resets** (Session, Weekly, Monthly, and Custom Session), the indicators can completely isolate intraday/intraweek price relationships from overnight gaps and illiquidity, delivering a highly visual and robust quantitative scanner system. --- ## 2. Mathematical Foundations and Calculation Logic -The mathematical structure dynamically recalculates the cointegrated relationship at each bar $i$ over a rolling or anchored window of size $N$ (`window_size`): +The statistical calculations operate on synchronized close prices for Asset $A$ ($P_{A,t}$) and Asset $B$ ($P_{B,t}$) over an active rolling or anchored window of size $N$ (`window_size`): ### A. Rolling Ordinary Least Squares (OLS) -The indicator calculates the rolling mean of the Asset $A$ ($\bar{A}$) and the Benchmark $B$ ($\bar{B}$). It then solves the OLS regression of $A$ on $B$ to find the dynamic Hedge Ratio ($\beta$) and Intercept ($\alpha$): +The calculator computes the rolling mean of Asset $A$ ($\bar{A}$) and Benchmark $B$ ($\bar{B}$). It solves the OLS regression of $A$ on $B$ to find the dynamic Hedge Ratio ($\beta$) and Intercept ($\alpha$): $$\beta_i = \frac{\text{Covariance}(A, B)}{\text{Variance}(B)}$$ $$\alpha_i = \bar{A}_i - (\beta_i \times \bar{B}_i)$$ -### B. Dynamic Spread and standard deviation +### B. Dynamic Spread and Standard Deviation The spread at each bar $t$ within the window is calculated. Because we subtract the OLS intercept ($\alpha_i$), the rolling mean of this spread over the window is **algebraically guaranteed to be exactly 0.0**: -$$\text{Spread}_{t} = A_{t} - \beta_i B_{t} - \alpha_i \quad \text{for } t = i-N+1 \dots i$$ +$$\text{Spread}_{t} = P_{A,t} - \beta_i P_{B,t} - \alpha_i \quad \text{for } t = i-N+1 \dots i$$ -The sample standard deviation ($\sigma_{\text{spread}}$) of the spread over the active window is computed: +The sample standard deviation ($\sigma_{\text{spread}}$) of the spread over the active window is computed as: $$\sigma_{\text{spread}} = \sqrt{\frac{1}{N-1} \sum_{k=0}^{N-1} (\text{Spread}_{i-k})^2}$$ -### C. Volatility-Normalized Z-Score +### C. Separate Window Z-Score (PairsTrading_Pro) The final Z-Score is calculated, representing how many standard deviations the current spread has drifted away from its statistical equilibrium of $0.0$: -$$Z_i = \frac{\text{Spread}_i}{\sigma_{\text{spread}}}$$ +$$Z_i = \frac{P_{A,i} - \beta_i P_{B,i} - \alpha_i}{\sigma_{\text{spread}}}$$ + +* **$Z \ge 2.0$ (OrangeRed Histogram):** Spread is extremely overvalued (Short A, Long B). +* **$Z \le -2.0$ (DeepSkyBlue Histogram):** Spread is extremely undervalued (Long A, Short B). +* **$Z \in [-1.5, 1.5]$ (Gray Histogram):** Symmetrical neutral noise zone. + +### D. Main Chart Cointegration Bands (PairsTrading_Bands_Pro) + +By rearranging the spread equation back to the price space of Asset $A$, we project the dynamic statistical boundaries directly onto the main price chart: + +$$\text{Center Line (Equilibrium / } Z=0.0\text{):} \quad \hat{P}_{A,i} = \beta_i P_{B,i} + \alpha_i$$ + +$$\text{Outer Upper Band (Extreme / } Z=+M_{\text{outer}}\text{):} \quad \text{Band}_{\text{up, outer}} = \hat{P}_{A,i} + M_{\text{outer}} \times \sigma_{\text{spread}}$$ + +$$\text{Outer Lower Band (Extreme / } Z=-M_{\text{outer}}\text{):} \quad \text{Band}_{\text{low, outer}} = \hat{P}_{A,i} - M_{\text{outer}} \times \sigma_{\text{spread}}$$ + +$$\text{Inner Upper Band (Warning / } Z=+M_{\text{inner}}\text{):} \quad \text{Band}_{\text{up, inner}} = \hat{P}_{A,i} + M_{\text{inner}} \times \sigma_{\text{spread}}$$ + +$$\text{Inner Lower Band (Warning / } Z=-M_{\text{inner}}\text{):} \quad \text{Band}_{\text{low, inner}} = \hat{P}_{A,i} - M_{\text{inner}} \times \sigma_{\text{spread}}$$ --- ## 3. MQL5 UI & Architecture * **Decoupled Math Engine (`PairsTrading_Calculator.mqh`):** - All covariance, variance, rolling OLS, and Z-Score computations are encapsulated inside the highly optimized `CPairsTradingCalculator` include class. + All covariance, variance, rolling OLS, and Z-Score computations are encapsulated inside the highly optimized `CPairsTradingCalculator` include class. It exposes public getter methods (`GetBeta()`, `GetAlpha()`, `GetStdDev()`) to feed calculated coefficients directly to the main-chart bands wrapper, completely eliminating redundant loops and guaranteeing 100% data alignment. * **Strict $O(1)$ Real-Time Tick Optimization:** - The calculator uses the platform's `prev_calculated` parameter to process only the newest incoming bar on every tick. This keeps CPU usage at absolute zero, allowing the Z-Score to update live in real-time. - -* **VWAP-Style Anchored Resets:** - In addition to standard rolling windows (`InpLookback`), the indicator supports dynamic resets: - * **Daily Reset (`ANCHOR_SESSION`):** Resets daily. Excellent for intraday trading. - * **Weekly Reset (`ANCHOR_WEEK`):** Resets weekly. Ideal for swing trading. - * **Custom Session (`ANCHOR_CUSTOM_SESSION`):** Resets at a user-defined broker-time range (e.g. `09:00` to `18:00`). It completely filters out overnight gaps and illiquid trading hours, leaving the Z-Score flat/empty (`EMPTY_VALUE`) during inactive periods. + The calculator uses the platform's `prev_calculated` parameter to process only the newest incoming bar on every tick. This keeps CPU usage at absolute zero, allowing both the separate-window histogram and the main-chart bands to update live in real-time. * **Advanced Bar-Time Synchronization:** - `PairsTrading_Pro` aligns Symbol A and Symbol B prices perfectly by timestamp using `iBarShift(..., false)` and `iClose`, ensuring that different market open/close times or missing bars do not distort the calculation. + Assets do not always share identical trading calendars or liquidity densities. `PairsTrading_Pro` aligns Symbol A and Symbol B prices perfectly by timestamp using `iBarShift(..., false)` and `iClose`, ensuring that different market open/close times do not distort the calculation. To ensure chart-independence, the synchronization uses a dedicated `iClose` fallback rather than the local chart's `close[0]`. -* **Hardlocked Scale Bounds `[-3.5, 3.5]`:** - To prevent single extreme black-swan spikes (e.g., Z-score hitting $-10.0$ during oil gaps) from squishing the entire historical chart into an unreadable flat line, the separate window's scale is fixed between `-3.5` and `3.5`. Outliers are simply clipped at the boundaries, maintaining a perfect, consistent visual aspect ratio across all timeframes. +* **VWAP-Style Anchored Resets:** + In addition to standard rolling windows (`InpLookback`), the indicators support dynamic resets: + * **Daily Reset (`ANCHOR_SESSION`):** Resets daily. Excellent for intraday trading. + * **Weekly Reset (`ANCHOR_WEEK`):** Resets weekly. Ideal for swing trading. + * **Custom Session (`ANCHOR_CUSTOM_SESSION`):** Resets at a user-defined broker-time range (e.g. `09:00` to `18:00`). It completely filters out overnight gaps and illiquid trading hours, plotting `EMPTY_VALUE` during inactive periods to keep statistics pure. + +* **Hardlocked Separate Window Scale Bounds `[-3.5, 3.5]`:** + To prevent single extreme black-swan spikes (e.g., Z-score hitting $-10.0$ during weekend gaps) from squishing the entire historical chart into an unreadable flat line, the separate window's scale is fixed between `-3.5` and `3.5`. Outliers are simply clipped at the boundaries, maintaining a perfect, consistent visual aspect ratio across all timeframes. --- ## 4. Parameters +### A. Common Parameters + * **Symbol A (`InpSymbolA`):** The primary asset to trade (Default: `"UKOIL"` - Brent Crude Oil). * **Symbol B (`InpSymbolB`):** The secondary benchmark asset (Default: `"USOIL"` - WTI Crude Oil). * **Anchor Reset (`InpAnchor`):** The reset anchor period (None, Session, Week, Month, Custom Session). @@ -71,17 +91,25 @@ $$Z_i = \frac{\text{Spread}_i}{\sigma_{\text{spread}}}$$ * **Custom Start (`InpCustomStart`):** Session start time in format "HH:MM" (Used if Anchor = Custom). * **Custom End (`InpCustomEnd`):** Session end time in format "HH:MM" (Used if Anchor = Custom). +### B. Bands Specific Parameters + +* **Draw Center Line (`InpDrawCenterLine`):** Toggle to draw the gold Equilibrium Center Line ($Z=0.0$). +* **Draw Inner Bands (`InpDrawInnerBands`):** Toggle to draw the dotted Coral/LightSkyBlue Warning Bands ($Z=\pm 1.5$). +* **Inner Band Multiplier (`InpInnerMultiplier`):** The Z-Score multiplier for the inner bands (Default: `1.5`). +* **Draw Outer Bands (`InpDrawOuterBands`):** Toggle to draw the dashed Crimson/DeepSkyBlue Extreme Bands ($Z=\pm 2.0$). +* **Outer Band Multiplier (`InpOuterMultiplier`):** The Z-Score multiplier for the outer bands (Default: `2.0`). + --- ## 5. Advanced Statistical Arbitrage Strategies ### A. Classic Spread Execution (Mean Reversion) -* **Buy the Spread ($Z \le -2.0$ - DeepSkyBlue):** Symbol A is extremely underpriced relative to Symbol B. +* **Buy the Spread (Z-Score $\le -2.0$ or Price touches Lower Outer Band):** Symbol A is extremely underpriced relative to Symbol B. * *Action:* **BUY Symbol A** (Long) and **SELL Symbol B** (Short) with equal cash exposure. -* **Sell the Spread ($Z \ge 2.0$ - OrangeRed):** Symbol A is extremely overpriced relative to Symbol B. +* **Sell the Spread (Z-Score $\ge 2.0$ or Price touches Upper Outer Band):** Symbol A is extremely overpriced relative to Symbol B. * *Action:* **SELL Symbol A** (Short) and **BUY Symbol B** (Long) with equal cash exposure. -* **The Exit ($Z \to 0.0$ - Gray):** When the histogram returns to the middle $0.0$ axis, the spread has returned to its statistical equilibrium. Close both legs simultaneously to lock in the mean-reversion profit. +* **The Exit (Z-Score $\to 0.0$ or Price touches Center Line):** When the spread returns to its statistical equilibrium, close both legs simultaneously to lock in the mean-reversion profit. ### B. The Quant-Grade Synergy: Cointegration + LLD Pro (Single-Leg Trading)