SPY Day Trading Strategy

The SPY Day Trading Strategy presents an intriguing opportunity in the SPY market. By simply adhering to two straightforward criteria – a specific formula threshold and an open-down scenario – traders can potentially capitalize on market movements from 2005 to the present day.

The results indicate a promising profit/loss ratio and a consistent trend in fill rates, suggesting the strategy’s viability over time. With its simplicity and promising returns, this approach offers an enticing avenue for traders looking to navigate the complexities of day trading in the SPY market.

Some weeks ago, I wrote about a potential day trading strategy in XLP. This is a similar test done in SPY:

Let’s look at the trading rules:

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If these two simple criteria are fulfilled, then go long at the open and hold until close.

This is the equity curve from SPY’s inception until today:

SPY day trading strategy
SPY day trading strategy

The returns are promising but not tradable: There are 258 trades, and the average gain per trade is 0.16%.

The good news is that adding a filter can improve this SPY day trading strategy.

SPY Day Trading Strategy: Analyzing Returns in the First Hour, Middle of the Day, and the Last Hour

In day trading, what are the returns in the first hour, middle of the day, and in the last hour?

Lately, I have broken down the trading day into performance during the first hour, the middle of the day, and the last hour. Previously, I have written two articles about when SPY establishes the high and low during the trading day:

Brett Steenbarger had an interesting post some years back about when at what time of the day SPY had the most accumulated returns (I can’t find the post now, he has written hundreds). I remember his conclusion: Most of the return happened in the first and last hour of the trading day, and the middle had a net loss.

Dividing the trading day into the first hour, the middle/lunch hours, and the last hour, we get the following accumulated returns from 2010 until the present:

The most return came in the last hour of this period. But again, the middle of the trading is just noise (at least more noise in the first and last hour).

We updated parts of this article later in an article called the return during the last hour of trading.

What is day trading, and how is it divided in terms of time segments during the trading day?

Day trading involves buying and selling financial instruments within the same trading day. It is divided into time segments: the first hour, the middle of the day, and the last hour.

How does the SPY day trading strategy work?

This strategy involves two simple criteria: first, a trading indicator based on the price action the previous day, and second, the SPY market must open lower today. Traders execute a long position at the market open and hold until close if these conditions are met.

What are the key findings from the analysis of the SPY day trading strategy?

The analysis indicates a promising profit/loss ratio and a consistent trend in fill rates over the period from 1993 to the present day. This suggests that the strategy could be potentially profitable for traders in the SPY market.

How does the equity curve demonstrate the performance of the trading strategy?

The equity curve provides a visual representation of the strategy’s performance over time. In this case, it shows a positive trend, indicating potential gains from employing the “Yesterday Down and Today Opens Down” strategy in the SPY market.

What makes this day trading strategy appealing to traders?

The simplicity of the strategy, with just two straightforward criteria to follow, combined with the promising returns demonstrated in the analysis, makes it an attractive option for traders seeking opportunities in the SPY market.

How does the SPY Day Trading Strategy differ from traditional day trading methods?

The SPY Day Trading Strategy involves adhering to two simple criteria: a specific formula threshold from the previous day and an open-down scenario. This strategy offers a streamlined approach compared to traditional methods, potentially reducing complexity while still aiming for profitable market movements.

What are the key criteria for initiating a trade according to the SPY Day Trading Strategy?

To initiate a trade using the SPY Day Trading Strategy, two criteria must be met: (1) the formula (c-l)/(h-l) must have been lower than 0.1 the previous day, and (2) the SPY must open lower than the previous day. These straightforward conditions serve as entry signals for traders.

What kind of results has the SPY Day Trading Strategy produced historically?

Historical results from 2005 to the present indicate promising outcomes for the SPY Day Trading Strategy. It demonstrates a positive profit/loss ratio and a consistent trend in fill rates. The average return of 19.75% suggests the strategy’s potential for capitalizing on market movements over time.

How does the SPY Day Trading Strategy simplify the day trading process?

The SPY Day Trading Strategy simplifies the day trading process by providing clear and concise criteria for initiating trades. By focusing on just two factors – the previous day’s formula threshold and the current day’s open-down scenario – traders can potentially reduce decision-making complexity and streamline their trading approach.

What are the accumulated returns during the different time segments of the trading day from 2010 to the present?

The accumulated returns during different time segments from 2010 to the present show that the most returns came in the last hour, while the middle of the trading day appeared to be more noisy in terms of returns.

What did Brett Steenbarger’s research reveal about when SPY had the most accumulated returns during the trading day?

Brett Steenbarger’s research indicated that the most accumulated returns for SPY occurred in the first and last hours of the trading day, with the middle hours having a net loss.

Conclusion

In conclusion, the SPY Day Trading Strategy seems to offer a promising approach to potential gains. By following two straightforward criteria – a specific formula from the previous day and a downward open today – traders could capitalize on market movements.

The results from 1993 until today show a positive profit/loss ratio and a notable average return. This strategy presents an intriguing opportunity for traders to explore further and possibly incorporate into their trading arsenal.

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