Last Hour Trading (Returns And Performance)
What is the return during the last hour of trading? A search on the internet reveals that traders should beware the last hour of trading and that volatility picks up. Let’s do some simple “fact-checking” on the S&P 500 and find out the return during the last hour of trading. Based on the results you might even manage to develop a last hour trading strategy.
The return during the last hour is slightly negative but seems very much like a random walk. However, the returns are slightly tilted towards the direction of the trend from the opening price of the day. If the price one hour before the close is higher than the open, the returns during the last hour of trading increase (and vice versa).
Key Takeaways
- Last hour returns are slightly negative overall
- Price behavior resembles a random walk pattern
- Returns depend on whether price above daily open
- Trend continuation influences direction of last hour moves
- Overnight periods historically show stronger returns than intraday
- Adding filters or variables can improve last-hour strategies
- Simple unfiltered last-hour trading offers weak edge
The return during the last hour of trading – S&P 500
We measure the return during the last hour of trading by looking at the futures data in the S&P 500 (ticker code ES) from 2011 until today. We buy (go long) at 1400 local Chicago time and we exit at the close at 1500. This is the equity curve:
The average gain is slightly negative and looks very much like a random walk.
However, the return during the last hour of trading is very much a continuation pattern. If the price at 1400 is higher than the opening price of the day, the return is positive, and negative if the price is lower than the opening. This is the equity curve when the price at 1400 is lower than the opening price of the day:
Amibroker code for dollar-cost averaging:
If you’d like to have the code in Amibroker, you can buy it on the link below. Additionally, you get the code and logic behind all our free trading strategies on this website (we are continually updating Tradestation and Easy Language code as well).
Amibroker is a very powerful tool despite its cheap price. It works both for backtesting and live trading, especially with Interactive Brokers. How you can learn to code, do backtests, and live trading is described in our Amibroker course.
The returns during the last hour of trading – conclusion:
The poor returns during the last hour of trading are expected. The fact is that the stock market “works” during the day, but stocks love the night: Practically all returns come when we are sleeping, exercising, or watching TV. Overnight trading involves substantially better odds of success.
Is it possible to develop a last hour trading strategy? Yes, if add one or more variables you can improve the average gain substantially.
If you want to have trading edges we recommend our free trading strategies or monthly Trading Edges (the latter for a subscription fee).
FAQ:
Is there a specific return trend during the last hour of trading in the S&P 500?
Discover the observed return trend during the last hour of trading in the S&P 500, including insights into its randomness and potential correlations with the day’s opening price.
Why is Amibroker recommended for backtesting and live trading?
Learn about the features of Amibroker and why it is recommended for backtesting and live trading, especially in conjunction with Interactive Brokers.
Is it possible to develop a successful last hour trading strategy?
Explore the possibility of developing a last hour trading strategy, considering the potential improvement in average gains by introducing additional variables.
