The Turnaround Tuesday Trading Strategy

Last Updated on September 13, 2021 by Oddmund Groette

One of the most well-known effects in the stock market is the Turnaround Tuesday. Is this a myth or fact?

This article looks at the Turnaround Tuesday trading strategy. The Turnaround Tuesday effect exists, but it needs additional filters to work as a stand-alone trading strategy. Buying on weakness on a Monday seems like a good trading strategy.

What is Turnaround Tuesday?

We have previously written about potential trading strategies based on the day of the week effect, particularly on Mondays: the stock market has a tendency to change direction and move in the opposite direction of the previous move prior to Mondays.
For example, if the market is down on a Monday, you are likely to get above-average returns in the next few days. Opposite, if Monday is very strong, the return over the next days is substantially lower compared to a down day.

The Turnaround Tuesday effect or trading strategy

We test the following strategy:

  1. Today is Monday.
  2. The close must be lower than the open.
  3. The IBS must be below 0.2.
  4. If 1-3 are true, then enter at the close.
  5. Sell at Tuesday’s close.

This returns the following compounded equity curve in SPY from 1993 until September 2021:

  • Number of trades: 247
  • Average gain per trade: 0.41%
  • CAGR is 3.5%
  • Exposure/time in the market: 3.4%
  • Win ratio: 60%
  • Average gain per winner: 1.23%
  • Average loss per losing trade: -0.82%

The return is substantially higher than any other day.

The same strategy as above produces the following profits on the different weekdays (1 is buying the Monday close, 2 is Tuesday’s close, etc.):

As you can see, buying at the close on a Monday is twice as good as buying on the Tuesday close, not to mention the other days which are even less profitable.

Thus, the Turnaround Tuesday is no myth. Buying weakness on Mondays has turned out to be a profitable strategy for about 30 years.

Flipping the Turnaround Tuesday

Let’s flip the strategy:

  1. Today is Monday.
  2. The close must be higher than the open.
  3. The IBS must be above 0.8.
  4. If 1-3 are true, then enter at the close.
  5. Sell at Tuesday’s close.

Buying on strength on a Monday is not a good idea:

If you want the Amibroker (AFL) and Tradestation (Easy Language) code for the Turnaround Tuesday trading strategy, you can order it together with all the other code from our free trading strategies:

Disclaimer: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinions – they are not suggestions to buy or sell any securities.