Overnight Trading Strategy In The S&P 500 – 2024
The overnight trading strategy in the S&P 500 involves entering a trade at the market’s close and exiting it at the following day’s open. This strategy relies on specific criteria like the Average True Range (ATR) and the IBS ratio to determine when to enter and exit positions. However, it’s important to note that this strategy is tailored for long positions, as attempting to apply it to short positions doesn’t produce positive outcomes.
This article presents an overnight trading strategy in the S&P 500. Overnight means entering at the close and exit at tomorrow’s open. We exit at the next open no matter the price movement during the night session.
We have previously written about other overnight trading strategies plus described the night trading session:
- Night trading strategies (overnight edges/strategies)
- The 5-Day Low Overnight Trading Strategy
- 4 overnight trading strategies in the S&P 500
Overnight trading strategy in the S&P 500
Let’s look at the trading rules in plain English:
THIS SECTION IS FOR MEMBERS ONLY. _________________ BECOME A MEBER TO GET ACCESS TO TRADING RULES IN ALL ARTICLES
CLICK HERE TO SEE ALL 400 ARTICLES WITH BACKTESTS & TRADING RULES
You are holding SPY for 24 hours, and we get the following nice equity curve when we backtest from inception in 1993 until today:
We believe this is good equity for short for owning SPY just 24 hours. There are 688 trades and the average gain is 0.31% per trade.
Vice versa, for short, does not work. That is expected because you are fighting the upward trend in the markets.
———————–
If you would like to have the Amibroker and Tradestation code for this strategy plus 70+ other free trading strategies published on this website, please click on this link:
For more trading strategies, please click here:
- Free trading strategies
- Monthly trading edges (subscription service)
What is an overnight trading strategy, and how does it work in the S&P 500?
An overnight trading strategy involves entering a trade at the market’s close and exiting it at the following day’s open. In the case of the S&P 500, this strategy uses specific criteria, such as Average True Range (ATR) and the IBS ratio, to determine entry and exit points.
What are the key criteria used in the S&P 500 overnight trading strategy?
The criteria include calculating the ATR (a 25-day average of the High minus Low), the high of the last 10 days, the IBS (C-L)/(H-L) ratio, and a band below the 10-day high. If the SPY closes below this band and the IBS is below 0.5, a long position is entered at the close and exited at the next open.
Is the overnight trading strategy in the S&P 500 applicable to both long and short positions?
The strategy is designed for long positions, and an approach that is vice versa for short positions does not yield favorable results.
Conclusion
The overnight trading strategy in the S&P 500 focuses on entering trades at the market’s close and exiting them at the following day’s open. This strategy relies on specific criteria like the Average True Range (ATR) and the IBS ratio to determine entry and exit points. However, it’s important to note that while this strategy is effective for long positions, attempts to apply it to short positions have not been successful. Overall, this approach offers a structured method for trading in the S&P 500 market, providing potential opportunities for traders to capitalize on market movements.