One of the most recent trends among the traders in the Indian stock market is to opt for pair trading. Pair trading is one of the many trading techniques that even the stock investment advisors swear by. It is a type of trading where the long term position of a stock is correlated with the short term position of a similar and related a stock. There are numerous benefits of this kind of pair trading which lets the trader play relatively safe while trading in the Indian stock market.
The major advantage of pair trading is that the traders can decide to invest for a longer span of time on the stocks that are under performing and book the profits for the stocks that are over performing. The best paid stock advisory services can vouch to employ the pair trading technique as the traders always have the option to reply on one stock while the other is under performing. The traders can wait for the prices to shoot up until they sell off the underperforming stock and book the profits immediately in the stocks that are performing well.
The best stock market advisory services extensively rely on this trading technique as it protects the traders from the highly volatile stock markets and derive the profits from the difference in the price change between the two stocks. Employing this technique helps to mitigate the potential risks that a trader might face while dealing with stocks and the volatility of the market. This ensures a thorough protection against the capital invested by the traders.
Pair trading is the technique which is independent of the overall direction in which the market is heading towards because the two stocks are correlated with one another than with the market. Hence it is for the same reason that the traders are sure to make profits regardless of the market position.
However, there are few aspects of pair trading that the Indian stock market advisory services advice its traders to beware. Since this technique demands to leverage on very minute price changes in the stocks, the trader must be very well equipped with the knowledge of the market and it is recommended that the traders have a prior experience of trading in the stock market and should not be a novice in trading the stocks.
Pair trading has a many more advantages than the drawbacks to it. And it is precisely for the same reason that the Indian stock market advisory services advocate for trading the stock in pairs with stock that belong to the same business sector and book their envisioned profits.