Pairs trading strategy: a recommendation system

Trading strategies can be used to exploit certain patterns within the market. The Pairs Trading Strategy exploits the co-movement nature of pairs of stocks to gain profit. This paper introduces a new methodology framework for the Pairs Trading Strategy from mining to monitoring and trading pairs at appropriate times to gain profit. This framework is implemented in a system that sends out alerts to traders at appropriate times according to the strategy. The proposed recommendation system is tested using synthetic data, proving its validity by showing gains in profit for each test.