Overnight Trading Strategies: Nighttime Trading Tactics and Insights

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.

After-hours trading is when you buy and sell between the official market hours. Overnight trading is not like that. You place orders at the close or just seconds before the close. You sell at the open the next day or put in a limit or market order at or very near the opening bell.

There are good reasons why you should keep positions overnight, at least in the stock market. Some markets rise during the night period. This is something you can take advantage of when you are building strategies. You are looking to find edges from holding from the close to the next open. The time frame is short, but there are reasons why this should work.

Just have a look at the below chart 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.

You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/overnight-trading/