SPY Sets Low or High in the Last Hour – An Intriguing Day Trading Strategy

I have previously written two articles about when SPY sets high and low during the day:

Key Takeaways

• Buy weakness, sell strength strategy performs consistently
• Last hour highs and lows provide trading signals
• Enter next day open, exit by midday
• Buying after weak close shows stronger performance
• Shorting after strong close shows weaker edge
• Overnight holding increases drawdowns significantly
• Stop-loss and targets reduce overall strategy performance
• Mean reversion dominates after last hour extremes

• Which Trading Hour Is The Best? When Should You Buy And Sell During The Day?
• At what time of day sets SPY high and low?
• Intraday high and low in SPY by weekday

I’m trying to find something tradeable out of these simple numbers but it’s not easy. However, the “boring” buying on weakness and selling on strength seems to work pretty well. Entry is at the open next day and exit is at 1130 the same day (only day trades). Buying on the close gives approximately the same results. However, drawdowns are a lot bigger. So using this approach you don’t get paid for holding overnight (from yesterday’s close).

Here are some results from January 2010 until August 2012:

Long:

	Accumulated in %	#fills	#wins	Avg.
Low last hour longs	15.92	136	78	0.117
Low last hour and opens up next day	2.92	77	41	0.038
Low last hour and opens down next day	13	59	37	0.220
Low last hour and down day	9.51	112	62	0.085
Low last hour and up day	6.41	24	16	0.267
Short:
	Accumulated in %	#fills	#wins	Avg.
High last hour shorts	9.4	187	92	0.050
High last hour and opens up next day	5.42	96	49	0.056
High last hour and opens down next day	3.2	89	41	0.036
High last hour and down day	1.2	27	15	0.044
High last hour and up day	8.21	160	77	0.051

I have also tried with targets and stop-loss, but with no improvement at all, rather the opposite.

The equity curve for all trades going long if low is in the last hour and going short if high is in the last hour looks like this:

FAQ:

– What is the key takeaway from the analysis regarding buying on weakness and selling on strength?

The primary takeaway is that this “boring” trading strategy appears to work well. It involves entering long or short positions based on SPY’s performance during the last hour of trading.

– Are there variations in the strategy based on different trading scenarios?

Yes, the content provides insights into different scenarios, such as buying or shorting based on the last hour’s performance and the market’s direction the next day (up or down).

– Are there specific results or performance metrics shared for these trading strategies?

Yes, the content presents results, including accumulated returns, the number of trades (fills), the number of winning trades, and average returns for various trading scenarios.