Gold Weekend Trading Strategy (GLD Swing Trading)

Last Updated on April 19, 2022 by Quantified Trading

Gold swing trading strategies are rare and difficult to find. However, a gold weekend trading strategy exists in many forms. Commodities and gold are hard to trade much harder than stocks, in our opinion. However, a few strategies have worked for a pretty long time.

Today we backtest a trading strategy that has worked for a couple of decades: the gold weekend swing trading strategy. The strategy is long gold over the weekend and has produced decent risk-adjusted returns.

Gold has a tailwind overnight

Just like stocks, gold has a positive bias overnight. The tailwind is, of course, not consistent, but almost all the gains in gold have come from owning it overnight. This is something we have covered in this article:

GLD and the price of gold

The gold swing trading strategy in this article is performed on the ETF with the ticker code GLD that tracks the price of gold during normal market hours on the stock exchanges. The test period is from inception in late 2004 until September 2021.

For those who have access to the futures contract, we recommend testing other twists and different times of entry and exits.

Daily effects in GLD and gold

Let’s first test the daily performance of gold.

We start by testing the daily gains by investing 100 000 at the close of each day and holding until the open the next day:

Number 4 means we buy at the close on a Thursday and sell at the open on Friday. This has been the best “day of the week effect”.

If we own GLD from the close to the next day’s close we get these results:

Again, Thursday shows the most promise. Indirectly, we see that the intraday gain from the open to the close on Fridays is good.

Let’s test the average gain from the open to the close per day (day trades):

Number five shows the gain from owning gold from the open to the close on Fridays. This is the only day with a positive return despite the fact that gold has tripled in price during the test period.

The weekend effect in gold

Based on the facts above let’s test the performance of owning gold/GLD from the close of every Thursday until the close of Friday:

This gold swing trading strategy in gold produced an average gain of 0.14% and the profit factor is 1.4. In other words, not the best strategy.

If we buy at the close on a Thursday and sell Monday morning/open, gold weekend trading strategy,  we get 0.19% per trade and this equity curve:

This is not very tradeable either, in our opinion. The profit factor is 1.3.

However, it gets better if we include one very simple parameter:

The equity chart above enters at the close on Thursdays and sell at the open on Mondays. The gold weekend trading strategy has produced the following numbers:

  • CAGR 6.8% (buy and hold 8.3%)
  • The average gain is 0.3% per trade
  • Exposure/time spent in the market is 21%
  • The win ratio is 60%
  • The average winner is 1.21%, the average loser is -1.05%
  • The profit factor is 1.8
  • The max drawdown is 10.6%

We think these are acceptable numbers to trade a small position and will most likely present this edge as a monthly Trading Edge later:

If you’d like to have the Amibroker (AFL) and Tradestation (Easy Language ) code for the Gold Weekend Strategy plus the additional 70+ free trading strategies we have published since 2012, you can order it here for a small fee:

Swing trading gold weekend gold trading strategy

All commodities are hard to trade and swing trading gold is difficult. Any inefficiencies are hard to find but the weekend gold trading strategy shows promise. Perhaps, if you enter the trade during the daytime and not on close, you can get a better entry. The same goes for the exit.

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