Overnight Short Trading Strategy

ByOddmund Groette Trading strategies

Below is a potential short strategy in the S&P 500:

Short= C>Ref(C,-1) AND Ref(C,-1)>Ref(C,-2) AND Ref(C,-2)>Ref(C,-3) AND ADX(5)>35 AND RSI(2)>90

Description:

If the close is higher for the third time in a row, 5 day ADX is bigger than 35 and RSI(2) is bigger than 90, then go short on the close.

Exit/cover on tomorrow’s open.

power-of-overnight-trading

This is the equity chart tested on SPY:

The initial capital is 100 000 and 200 shares of SPY traded throughout the test. No commissions and slippage.

Statistics:

The profit factor is 1.81.

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FAQ:

– What are the specific conditions for initiating a short strategy in the S&P 500 as described?

The short strategy requires three consecutive days of higher closing prices, a 5-day ADX above 35, and an RSI(2) exceeding 90.

– What does the equity chart signify in the context of the strategy tested on SPY?

The equity chart showcases the performance of the strategy with an initial capital of $100,000, trading 200 shares of SPY, and assuming no commissions or slippage.

– Can you explain the profit factor and its significance for this strategy?

The profit factor, which is 1.81, indicates the strategy’s overall profitability. A profit factor above 1 implies that the strategy generated more profit than loss.

I’ve got an Msc from Heriot-Watt University, Edinburgh (1996), in addition a to a business administration degree the Norwegian School of Management (BI – 1994). Did my mandatory military service in between.

After university, I worked two years as an auditor (1996-1998).

I co-founded Aksjeforum.com in 1998/99 - one of the first websites about trading and investing in Norway. It was later acquired by Digi.no in 2001.

I have written 4 books about trading (in Norwegian). One of them has sold 30,000 copies, a record for a financial book in Norway.

From 2001 until 2018 full-time independent prop trader (Series 7 in 2001) and investor.

2018-today: Investor, writer, analyst.

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