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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