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Showing results for tags 'market edge'.
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When do you think the most points are accumulated in the S&P E-mini market? During the day session or during the overnight session? To answer this question I developed two simple strategies. Both strategies only go long. They both use a daily chart and a 200-period simple moving average (SMA) as a market environment filter so trades are only taken when price closes above the SMA. Both systems were executed from 1997 to September 2011 with no slippage or commission cost deducted. The Day's Session The first strategy simply buys at the day's open and closes the position at the end of the day. Thus we are capturing the points gained or lost during the day session. The equity curve is a sum of the points gained or lost during the day session since 1997. Below is the equity curve of this trading system. The Night Session The night session strategy is just as simple but it opens a new position at the close of the daily bar. It then closes that position at the open of the next bar. Thus we are capturing the points gained or lost during the night session. The equity curve is a sum of the points gained or lost during the night session since 1997. Below is the equity curve of this trading system. As you can see there is a clear difference between the night session and the day session. What does this mean to you? There does seem to be an edge in exploiting long positions by riding the overnight session. My hypothesis is because so many active traders do not trade the overnight session, the market will often move in such a way as to lock them out from gains. Most people are familiar with the market shakeouts that rattle the faith of bullish participants, thus forcing them to lose their position. You've seen it where the market moves down to takeout your stop only to reverse in your favor. A painful experience. However, the market does have another subtle trick that messes with your psychology. That trick is making you miss the bull move all together. Yes, the markets are good at trapping you out of a move too! Anyway, keep this night vs. day session study in mind and perhaps you can use it to help gain an edge with your trading.