8 Night Strategies Trading (Overnight Trading Strategies)
Since 1993, all the gains in the S&P 500 have come from owning the index from the close to the open the next day. We see the same tendency in the gold markets. Thus, we can develop night trading strategies to take advantage of this bias. At the end of the post, we update the results of an overnight trading strategy we published in 2014.
Our strategy involves buying the close if today is the third lower close in a row and selling at the open the next day. Since 1993, this strategy has made 643 trades with an average gain of 0.13% per trade and a win rate of 65%. The max drawdown is 8%.
If you exit at the close the next day, you can increase the average gain per trade to 0.24%. However, the win rate drops to 60%, and the max drawdown doubles to 17%.
Just have a look at the chart below that shows the accumulated returns of owning the S&P 500 from the close to the open the next day since SPY’s inception in 1993.
The chart shows 100,000 invested and compounded in the ETF SPY from 1993 until today. Clearly, there is an edge! You have a nice tailwind you can take advantage of when building strategies.
On our website, you can find plenty of similar ideas to improve your trading strategy. We are trading a variant of this strategy ourselves, where the average gain is 0.35% per trade, but with a reduced number of trades.
Check out here >>