How To Use The Weekday Effect In Trading (Does The Day Of The Week Make A Difference?)

Last Updated on October 26, 2021 by Oddmund Groette

Trading is about repeating small trading edges in the market. If you work hard and diversify with different markets, time frames, strategies, and market directions, you can develop a decent portfolio of strategies that hopefully give you a smooth equity curve. Can the day of the week help you in diversifying and finding trading edges?

The day of the week makes a difference in trading – the weekday effect is a great tool to create edges in the market. Depending on the market and asset class, you can develop trading strategies that use daily seasonalities in the stock market.  The weekday effect doesn’t work on its own but needs to have additional parameters. For example, the Tuesday turnaround is one of the strategies that works pretty well in the US equity markets.

Today we look at the different weekday effects in the S&P 500, the DAX 40, OMX 30, the Nifty50, and the Hang Seng index. At the end of the article, we link to two old articles that contain strategies that either directly or indirectly use the day of the week.

How we test the day of the week effect:

The tests in this article are done like this:

  1. We buy at the close on weekdays 1-5. 1 is Monday and 5 is Friday.
  2. We exit at the close the next day.

Thus, the performance in the graphs below means that day 1 is the performance of Tuesday because we enter at the close of a Monday and exit at the close of Tuesday. Please keep this in mind when you read the article.

The tests are done from the year 2000 until September 2021.

Day of the week effect in the S&P 500

Let’s start with the most important index in the world: the S&P 500. The table below shows total profits for each day of the week:

Weekday 1 (from Monday to Tuesday) is best and has an average of 0.12%. Thus, Tuesdays are the best day of the week. This is the reason for the success of Turnaround Tuesday.

However, we can clearly see the win ratio is pretty similar despite different returns.

Day of the week effect in the DAX 40

The DAX is one of the most traded stock markets, and the DAX future is a popular trading vehicle. We trade the DAX futures ourselves, and we plan to send out one or several Trading Edges in the future based on this contract:

The table below shows how the different weekdays have performed in the DAX-30:

Weekday one is best and the worst day is from Wednesday’s close to Thursday’s close.

Day of the week effect in the NIFTY 50

The Nifty 50 index is the benchmark of the 50 largest Indian companies on the National Stock Exchange. India has thousands of listed companies and both trading and investing are growing in popularity.

The performance per day is like this:

Unlike the S&P  and the Dax, Nifty 50 is positive for all days of the week and Wednesday is the best day.

Day of the week effect in the OMX 30

OMX 30 is the leading Swedish index and consists of the 30 most traded stocks on Stockholm Stock Exchange. Companies like Investor AB, Volvo, Sandvik, Ericsson, Assa Abloy, Electrolux, and Atlas Copco need no introduction for those interested in both trading or long-term investing.

Historically, Sweden has been a great place to grow your wealth, with even better returns than the S&P 500 over the last 50 years, according to the book Triumpf Of The Optimists.

Sweden has also a great number of traders and OMX 30 is a very active trading tool.

Anyway, the day of week effect shows pretty similar patterns as in the S&P 500:

Tuesday is the best day and Thursday is by far the worst day.

Day of the week effect in the Hang Seng

Hang Seng is one of the most popular trading vehicles in Asia. It has 50 components that reflect the great majority of the market capitalization.

We traded the Hang Seng for a period but stopped a few years ago due to the time difference. We managed to trade a few strategies that worked reasonably well.

However, the day of the week effect is like this:

Again, the gain from Monday to Tuesday shows the best result.

How to use the weekday effect in stocks:

The reader might ask: This is interesting, but how can I use this in practice?

As an example of how to use it in real life, we link to two strategies that we have already published and that filter for the day of the week effect:

We have also used a daily seasonality in one of our monthly trading edges for long-term US Treasury bonds.

Here are some ideas we have published among our free trading strategies:

Amibroker and Tradestation code for the weekday effect:

We have made a database that contains all the Amibroker code (and we are gradually adding Tradestation and Easy Language code) for the free trading strategies we have published on the site:

 

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Disclaimer: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinions – they are not suggestions to buy or sell any securities.