Is it only in stocks that we have an overnight edge? It’s tiny and is, of course, not enough to make money if we include slippage and commissions. The average gain of holding the S&P 500 from the close until tomorrow’s open is 0.04%. Clearly, there is a solid edge! You have a nice tailwind you can take advantage of when building strategies: The chart shows 100 000 invested and compounded in the ETF SPY from 1993 until May 2021. Have a look at this chart that shows the accumulated returns of owning the S&P 500 from the close to the open next day: Why hold positions overnight?ĭid you know that practically all the gains over the last 30 years have come overnight? The time frame is short, but there are reasons why this should work. You are looking to find edges from holding from the close to the next open.
This is something you can take advantage of when you are building strategies:
How does night trading work?Īs you’ll learn below, some markets rise during the night period. Why night trade?Īs you’ll see from the statistics further below, there are good reasons why you should keep positions overnight, at least in the stock market. You sell at the open the next day or put in a limit or market order at or very near the opening bell. You place orders at the close or just seconds before the close. Night trading/overnight trading is not after-hours tradingĪfter-hours trading is when you buy and sell between the official market hours. In this article, we refer to the stock market as the S&P 500 or Nasdaq. Night trading is thus owning the “stock market” from 1600 until 0930 the next day. The official market hours for the stock market are 0930 to 1600 Eastern US time. In other words, night trading is the same as overnight trading. At the end of the article, we update the results of an overnight trading strategy we published in 2014.īy night trading we mean holding positions overnight – from the close of the trading day until the open the next day. Thus, we can develop night trading strategies to take advantage of this bias.
We see the same tendency in the gold markets. 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. This means that night trading (overnight trading) strategies in stocks get a boost from this effect/bias. In the stock market, the tendency is for the gains to accrue during the night – ie. All markets are different and have their own seasonalities and tendencies.
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