Crypto Pair Mean Reversion from Relative Price Changes

Summary

This document describes a two-asset crypto pairs strategy that compares each instrument’s price change over the current candle. When the difference exceeds a threshold, it opens a position in one direction on the second asset, aiming to profit as the relative moves converge. The example uses TRUMP and MELANIA perpetual contracts, with configurable trade quantity and a default difference threshold of 2%. It also specifies a 5% take-profit and 3% stop-loss based on the second asset’s entry price.

The strategy is intended for historically correlated assets with adequate liquidity, especially in moderate or ranging conditions. The document includes parameters and a short published backtest window on one-minute bars, but gives no performance results. Its implementation trades only the second asset; it does not open offsetting positions in both assets, so it is not a conventional market-neutral pairs trade. The directional mapping from relative change to long or short is also described inconsistently in the prose, and the sample’s backtest settings list only one instrument. These details limit what can be inferred about its hedging and risk behavior.

Key ideas

• The strategy compares two assets’ price changes and uses their difference to trigger trades.
• It targets convergence in relative performance and is presented for correlated crypto pairs.
• The example trades the second asset and sets take-profit and stop-loss levels from its entry price.
• The document recommends avoiding unrelated assets, extreme volatility, and inadequate liquidity.
• The published backtest configuration supplies a short test period but no performance statistics.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.