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The Overnight Edge
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The Overnight Edge

  #1 (permalink)
 Vendor: www.systemtradersuccess.com 
Gurnee, IL
 
Futures Experience: Advanced
Platform: TradeStation
Broker/Data: TradeStation
Favorite Futures: Futures
 
Posts: 46 since Apr 2010
Thanks: 17 given, 92 received

The Overnight Edge

I noticed this article talking about the difference between the day and night session. I ran my own study a few months back and thought it might be interesting to some.

What session holds more upside bias: the U.S. day session or U.S. night 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.

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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.

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As you can see there is a clear difference between the night session and the day session. 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. Anyway, keep this night vs. day session study in mind and perhaps you can use it to help gain an edge with your trading.

Code Download: You can download the EasyLanguage code (text file) if you wish.

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  #3 (permalink)
Trading Apprentice
St. Cloud MN
 
Futures Experience: Advanced
Platform: ninja
Favorite Futures: CL,TF,6E,GC
 
Posts: 15 since Feb 2011
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I know this is an older thread but I found it while browsing here. This is a very similar finding to gold GC. Very interesting, we should all just go long at night close in morning and be done with it

I can't post the link because I have another couple posts to go but I will.

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  #4 (permalink)
Trading Apprentice
St. Cloud MN
 
Futures Experience: Advanced
Platform: ninja
Favorite Futures: CL,TF,6E,GC
 
Posts: 15 since Feb 2011
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"Back in August 2010, we presented an idea proposed by our friends at SK Options trading for a very simple trading strategy: being long gold in the overnight session, and shorting it during the day. At the time of writing, such a strategy would have returned $2.16 billion from a $100 million initial investment in 10 years, a 37.46% annualized return. Today, we provide a much needed follow up to this quite stunning divergence. As SK notes: "we have revisited the article and written an update. Not only does the discrepancy still exist but it has been actually increasing. That fund would now be worth $5.26B, way up from $2.16B when we last wrote about it - in other words an increase of 143% in just over a year. When we wrote about this in August 2010, the annualized return of the Long Overnight/Short Intraday gold index was 37.46% since the start of 2001. However if we measure from now the annualized return since 2001 is 43.24%, with the annualized return of the Long Overnight/Short Intraday gold index standing at roughly 64.4% since 2009." So for those who wish to layer on an additional alpha buffer on top of what is already the best performing asset of the past decade, the SK Options way just may be the strategy. As for the reasons for this gross arbitrage - who cares. Is it manipulation? is it the early Asian buying offset by London pool selling? It is largely irrelvant - the point is that this is "the divergence that keeps on giving" - kinda like a Stolper trade, or an inverse Tilson ETF, and until it doesn't, or until something dramatically changes in the precious metal market, it is likely that this trading pattern will continue for a long time."

Zerohedge

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  #5 (permalink)
Trading Apprentice
St. Cloud MN
 
Futures Experience: Advanced
Platform: ninja
Favorite Futures: CL,TF,6E,GC
 
Posts: 15 since Feb 2011
Thanks: 0 given, 6 received

I would imagine silver would be similar.

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  #6 (permalink)
Trading Apprentice
St. Cloud MN
 
Futures Experience: Advanced
Platform: ninja
Favorite Futures: CL,TF,6E,GC
 
Posts: 15 since Feb 2011
Thanks: 0 given, 6 received

link to full article. Overnight Long/Intraday Short Gold Fund More Than Doubles In Just Over A Year: Generates 43% Annualized Return | ZeroHedge







sorry for all the posts in this thread just trying to get past my 5 post limit to post a link

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