Daily Effects In Long-Term Treasuries (Day Of The Week Trading Strategy In TLT)
Last Updated on July 7, 2022
20+ treasury bonds (TLT) show a significantly different performance depending on the day of the week. Is there any day of the week effect in TLT? Let’s test some day of the week strategies.
Assume we start with an account worth 100 000 and hold for one day and reinvest the profits. Below you find the accumulated profits from 2002 until early 2020:
- Mondays (from close Friday to close Monday): 58 072
- Tuesdays: 19 077
- Wednesdays: -16 986
- Thursdays: 944
- Fridays: 137 862
Clearly, Fridays and Mondays are much better than the rest. Let’s make a simple strategy based on this:
- Today is Thursday and the five-day RSI is below 60.
- Buy at the close.
- Sell when the close is higher than yesterday’s high.
This strategy returned 9.7% annually (0.35% per trade) while buy and hold returned 7.7%. Taxes and transaction costs are not included.
The equity curve looks like this:
Obviously, there are probably many other twists you can trade around this.
The weekday effect is stronger in stocks.
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Oddmund, I am supremely grateful for your blog posts. The strategies you’ve shared on this site got me started in the world of system design and I am now well on my way to becoming entirely self-employed as a trader. I just wanted to say ‘thank you’ for taking the time to share your thoughts and expertise – it has truly made a positive difference in my life.
By the way, have you looked into the intermarket relationships between TLT, GLD, and SPY relative to daily IBS? If not, it is definitely worth looking into.
Cheers,
Zimmer
Hi Mitch Zimmer,
Thanks for your positive feedback. I’m happy it’s going well for you!
I’m well aware of the IBS between the above mentioned ETFs, but it works so well I will not give it away for free 🙂 I’d like to keep the best for myself, it doesn’t make any sense to give it away.
Oddmund
I can echo Mitch’s sentiment.
TY Oddmund !
A brief remark/question;
In my own backtest of the above idea, I get a B&H for TLT for around 3.7%. (Annual Return )
Is this a misprint ?
TY
Hi Peter R,
I used Amibroker for the backtest, and 7.7% is taken from that program. Did you include dividends? TLT pays a dividend, and I use dividends reinvested to get correct return. Apart from that I use Yahoo! as source of the quotes, and I can’t understand any other explanation for why we have so different numbers. Are you using geometrical or arithmetic %? (Sorry if that is a very trivial question 🙂
Oddmund
I used Amibroker too.
I found my error; dividends as you suggested.
I missed a setting for my data source Barchart.
My results are now in line with yours.
Sry for the alarm .
TY for the reply,
Peter
Hi Peter,
I’m glad I could be of any help!
Good luck trading/investing.
Oddmund
Hi Odmunde,
Thank you for the very informative site. I have a question about trading execution that is relevant to this strategy and others that you publish. Do you use any automation to trade these or do you trade manually?
Let’s say I have 50 different strategies and they are all of the type ‘buy at close’, it is difficult to monitor all 50 strategies and determine which of them may signal at close. How do you do this?
Thanks!
Bruce
Hi Bruce,
Thanks for your nice words.
Yes, in order to trade many strategies you need to automate in some way or another. I use Amibroker for that. Some years ago I wrote about why I use Amibroker:
https://www.quantifiedstrategies.com/my-thoughts-on-amibroker/
Amibroker lets you automate everything from backtesting to buying and selling automatically.
I guess you can also use Excel and Visual Basic. I did that successfully for many years, but Amibroker is of course way better than Excel.
O.G.
Hi Odmunde,
Thanks for the link. I have used Amibroker for many years and agree that it is a great platform for backtesting. I find the automated trading function is much more difficult to implement and i have not had much success with it.
I am evaluating the Zorro platform now which seems to be much more aligned with automated trading and seems to be as fast in backtesting as Amibroker. It is certainly not as polished as AB but it seems very easy to switch from backtest to trade mode.
-Bruce
I have vaguely heard of Zorro. I stick to AB, I believe it’s the best platform and the fastest in backtesting. I agree it’s a bit cumbersome to trade live, but I have run it flawlessly for a long time. In the end I think it pays off to use a fully customizable platform.
Oddmund
Hi Oddmund,
very interesting anomaly in TLT. I also found another calendar anomaly in TLT: buy on close the day before last trading day, sell the next day on close. Do you know this one?
Uff, by typing “last trading day” I meant last trading day in a calendar month. My bad…
Hi,
Yes, I know that one, but don’t hesitate to write if you have more!
Oddmund
But that strategy is not good enough to trade it, in my opinion.
Hi Oddmund,
I can only replicate your results when I use unadjusted close prices for TLT. Am I doing something wrong or have you used unadjusted? My understanding is that we should use adjusted prices to adjust for the dividend (as you hinted that you have in prior comments).
Long time fan of your blog, first time commenting. Thanks for all that you share.
John
think I found what I was doing wrong. I didnt adjust the highs. sorry to waste your time!
Hi John,
I’m glad you solved it, and thanks for the nice words.
Oddmund