The 5-Day Low Overnight Trading Strategy (S&P 500 Overnight)

Last Updated on June 19, 2022

The S&P 500 has shown strong mean reversion tendencies for many decades. One reason for this is the tailwind in the form of 0.04% average return from the close until the next day open, so-called night trading, the lowest hang fruit in the tock market.

This article looks at the performance of the overnight session when the S&P 500 opens at a 5-day low but at the same time, the close is higher than the open.

• How to create a mean reversion trading strategy
• 4 overnight trading strategies

Let’s turn this into a testable trading strategy:

The 5-day low overnight trading strategy

Here is the testable trading strategy in plain English:

1. SPY must open at a 5 day low.
2. The close must be higher than the open.
3. If 1 and 2 are true, then enter on the close.
4. Exit tomorrow’s open.

I have previously written about a 5-day low strategy in SPY.

Here are the stats:

P/L in %		#Fills	Avg.
15.93		61	0.26

Test period from 2005 until July 2013. Here is the profit curve:

The biggest winner is 6% (in October 2008). Excluding that one still gives an average of 0.17%.

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