Maximizing Profits with Night or Day Trading: What You Need to Know

This blog post examines the idea of an "overnight edge" in trading S&P futures. It focuses on whether or not more points can be gained during the regular day or night session for the S & P futures market. You just might be surprised at some of the results!

This study expands upon the past article, The Overnight Edge Updated for 2022. As a quick recap, I would like to know if more points are gained during the regular day or night session for the S & P futures market.

To test this idea, I've constructed a trading system that will test the overnight edge by buying at the current close and exiting at the next day's open. Thus, our trade is exposed during the overnight session. Likewise, I've tested holding a trade only during the day by buying at the open and selling at the close.

Adding A 200-Day Regime Filter

I also added a 200-day simple moving average as a regime filter. Thus, I would only take long trades when the price is above the simple moving average and only take short trades when the price is below the simple moving average. Please review the past article for more details and results.

Trading Long In A Bear Market?

In this post, I want to expand the original test to take trades in the "wrong" regime. That is, instead of taking long trades in a bull market, as defined by our regime filter, I will take long trades during a bear market. The U.S. stock index markets have been bearish for 2022, and I wanted to know if shorting or going long is favored in either the night or day session.

Standard Regime Filter 

First, look at the table where I tested the major U.S. stock market indexes using the standard regime filter. That is, only taking long trades in a bull market and short trades only in a bear market.

The green color highlights trades that are averaging over $30 per trade. We can see the best opportunities occur at night on the long side! Shorting continues to be problematic in both the day and night sessions.

So what does this tell us?

These results demonstrate that:

1. It's much easier to build strategies on the long side during a bull market. Makes sense.
2. Opportunities may be most substantial in the overnight session.

Inverted Regime Filter 

Next, I want to perform this test again but invert the regime filter, so I will take long trades only in a bear market and only take short trades in a bull market. To perform this test, I used the EasyLanguage code provided in the previously mentioned article. So, review that article if you want a copy of the code. Below are the results.

Once again, the green color highlights trades averaging over $30 per trade. And once again, where is all the green seen? That's right, going long! You would think shorting in a bear market would be obvious. But it could be more apparent with this test.

So what does this tell us?

1. It's much easier to build strategies on the long side during a bear market. A bit surprising!
2. Opportunities may be most substantial in the day session. Notice this is the opposite of a bull market. 

Conclusions

For the U.S. stock index markets, the low-hanging fruit continues to be found on the long side. However, depending on the market regime, you will want to switch between the day or night session.

1. During a bull market, focus on overnight trading
2. During a bear market, focus on day trading