Pairs trading http://www.financial-spread-betting.com/strategies/pairs_trading.html is a trading strategy that allows you to go short on an instrument without having to unduly worry about the risk that the market you are shorting may rally sharply. This is because pairs trading is a market neutral spread betting strategy, i.e. a trading strategy that is not dependent on the overall direction of the market, and one that involves exploiting the difference in value between two historically related shares in the same sector. Thus, a pairs trade (sometimes referred to as a hedge trade) is one in which you go long on one share and short on another in the same sector.
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