Most gains for $SPY happen overnight: a quantitative study There is an article back from 2018 that says that most gains for $SPY happen overnight stating that you could have done overnight hold since 1993 and be more profitable than running the same by marker hours. I thought why not to review this thesis in a bit more detailed way. I set a simple backtest that is not going back to 1993 but rather just to Jan 1, 2010, holds overnight and sells in the morning. The Setup $10,000 to trade daily (nightly actually) Trading only $SPY Buy at 3:59 using a market order Sell at 9:30, 9:31, 9:32, 9:33, 9:34, 9:35 (let's see which one does better) using a market order Do not trade on early close days Strategy setup The Results Cumulative gain since Jan 1, 2010 Gain by year PS: This post is for fun and educational purposes only with no attempt to beat buy and hold. Do not use this as trading/investment advice. All calculation are made with Breaking Equity.
The simplest trading strategy: a quick study What is the simplest trading strategy? I thought the following has a pretty good chance to be the one: "buy and open and sell at the end of the day". Below is the study for this strategy since 2010. The Setup $25,000 to trade daily (assuming you would have 25K in margin at least) Trading only $SPY Buy at open using a market order Sell at close using a market order Do not trade on early close days Simplest trading strategy setup Since I'm testing the simplest strategy, I decided to test a couple of stop loss variations Stop loss 1% Trailing Stop Loss 1% Trailing Stop Loss 2% ...and conditions for entry. Only trade when stock is: Above SMA 100 on daily chart Above SMA 200 on daily chart The Results Cumulative gain since Jan 1, 2010 Gain by year (no stop loss) PS: This post is for fun and educational purposes. NOT investment advice.
Most traders underperform to a coin flip day trading bot It's said that 90% of traders fail to make money when trading the stock market. Still trading attracts millions of people in the attempt to beat the market and make money. The other day I was talking to skeptics who mentioned: “No matter what you do in trading in the end it’s no better than a coin flip”. To see how a coin flip would actually perform, I wrote a coin flip trading bot and backtested the results since 2016. Since the bot cannot flip a coin, I use random(0,1) Conditions: Trading $QQQ Random enter and exit on 10min intervals No stop loss Always exit EOD (no hold over night) 100 simulations per year to smooth it out Coin Flip Bot Setup Year over year performance: I expected it to perform worse than that
Can just one trade a day be any good? Everyone wants a trading strategy that allows you to make 1 trade per day but still beat the market. Here is an example of how that could be made. The Strategy: Gap & Go for Biotech Stocks I decided not to reinvent the wheel and just took the highly popularized Gap & Go strategy. The “Gap & Go” is looking for stocks gap up from the previous day's close price with the goal to follow an uptrend. I’m using biotech stocks as they tend to have higher volatility compared to other industries. An example of the ideal strategy setup Screening Criteria Biotech Equities (I’m using iShares Biotechnology ETF $IBB as a list) Up in the morning 3% or more Are above pre-market high and yesterday’s high Enter Criteria (when to open a position) Stock price is above EMA 9 Stock is going up and EMA 9 is going Exit Criteria(when to close a position) Price crosses below EMA 9 and stays there for 3 bars End of the same day Trailing stop loss of 1.0% Conditions $10,000 trading capital Do not trade early close days Only one trade per day If no equities meet the screening or entry criteria, do not trade The Results: +58% gain over one year Profit $5,801.4 | Wins 48 | Losses 49 Looks pretty decent but I think that’s just the beginning as I’m going to improve it even further by maybe looking at overall market conditions like $SPY behavior or news. Disclaimer: Not trading/investing advice, for fun and educational purposes.
Most of the times $QQQ rises overnight after a green day I have been experimenting quite a bit with major ETF recently and came across overnight behavior that has been somewhat consistent since 2016. It came from backtests for 3 ETFs that represent major indexes: $SPY, $QQQ, $DIA agains the following setups: Up Yesterday → Long in the Morning, Sell EOD Up Intraday → Long Overnight, Sell at 9:30 Next Day Down Yesterday → Short in the Morning, Sell EOD Down Intraday → Short Overnight, Sell at 9:30 Next Day Other Conditions $10,000 to trade daily Buy at intraday if condition is met Do not trade on early close days Market orders No Stop Loss in this study The Results $QQQ has best over night continuation rate; $SPY - the next day
Can pre-market tell you anything: a quantitative study Pre-market is an exiting time when you start looking at your screens to check what's going on. There is a lot of information to consume: news, reports, charts... you can continue the list. In this study I explore if price movement in pre-market can provide any indications of how the day is going to look like. There are 3 setups I tested from 2015 to 2022 Up 1%+ in pre-market Down 1%+ in pre-market Flat in pre-market (open and close are within 0.1%) Trading Conditions $10,000 to trade daily Trading only $SPY Buy at 9:30 if condition is met Do not trade on early close days The Results Cumulative gain by year for each setup PS: This post is for fun and educational purposes only with no attempt to beat buy and hold. Do not use this as trading/investment advice.
Winners keep winning There is a famous saying "Winners keep winning" which means that stocks that do well tend to keep doing well... I have backtested the idea using the setup below for 2021. Each day I'm looking for stocks which belong to NASDAQ 100 have been up 3% or more on a prior day are up in the morning (price above yesterday's close) Enter (criteria to open a position) Wait for 9:40 (market is open for 10min) Stock price keeps going up Buy only one stock for the day If there are multiple candidates buy the one with highest relative volume comparing to the average market volume so far (10min average volume) Initial capital $10,000 Gain is reinvested the next day Loss reducing the buying power the next day Exit (criteria to close a position) End of the same day or by loss at 0.5% from fill price Results: Cumulative GAIN 75.29% | Max Draw Down -5.36% Return vs buy and hold benchmark Top tickers traded Disclaimer: Not financial/investment advice. All calculations made using BreakingEquity.com
Buying the Dip - Fool.com There is a popular stock recommendations service Montley Fool. You may have seen their articles in the news, they are all over the place. One of the lists they offer is called "Rule Breakers". Described as: Discover market-beating growth stocks, learn which businesses are poised to be tomorrow's stock market leaders, and see which companies are the best stocks to invest in today. I have backtested the following thesis: these stocks are popular growth stocks with a strong market interest behind them which should result in a lot of participants buying the dip. ------------------------------------------------------------------------------------- Stocks Selection All "Rule Breakers" buy recommendations made in H1 2021 (from 2021-01-14 to 2021-06-24) 12 tickers total: NET, DDOG, SNOW, TTD, CPNG, PLNT, GDRX, TDOC, SNBR, AXON, MRNA, W I'm trading from 2021-07-01 to 2021-11-30 (to avoid look ahead bias) Enter Criteria (condition to open a position) Only enter in the first half of the day Wait for 9:40 (market is open for 10min) Stock price dropped more than 1% from the open price of the day There is a sign of recovery (EMA 8 is going up on a 3min chart) If there are multiple candidates - buy the one with highest relative volume within 10min Exit Criteria (condition to close a position 1% profit or a trailing stop loss 0.25% alway exit EOD Initial capital $10,000 Gain is reinvested the next day Loss reducing the buying power the next day Results: Cumulative GAIN 35.34% | Max Draw Down -4.07% | Alpha 24.89 (vs. SPY buy&hold). Not that bad for 5 month. "Rule Breakers" buy&hold performance for the same period: 6.39% (buying each stock worth of $833. 10K / 12 ~ 833) Returns vs. buy and hold benchmark - $SPY Tickers traded Disclaimer: Not financial/investment advice
Trading $SPY based on astrology. That's what 23% of Americans do... ~ 23% of Americans rely on astrology for buying or selling stocks - that's the title of the article posted by LendingTree some time ago. I backtested that for $SPY since 2015. I'm pretty sure there are unlimited variations of how you may read astrology when buying and selling stocks but for this study, I used Moon Phases. People tend to think that on full moon stocks go up... The Setup Buy on the full moon Sell on the new moon $10,000 for each trade No stop loss Testing both LONG and SHORT sides Moon Phase Strategy Setup The Results Going long in a bull market is profitable as expected. At least that's better than most of the traders according to CNBC, which says 90% lose money. LONG side results for $SPY SHORT side results for $SPY PS: do not trade like this. Do your research and due diligence before trading or investing.
Are Cramer's recommendations worth anything: a study of 13k Mad Money stock pics Jim Cramer is a controversial person. Nearly every day he's recommending a dozen of stocks with unshakable confidence like if he knows the future. Many of those recommendations if followed directly do not end up very well to say the least. I wanted to do a performance study for his recommendations to see how bad/good they are. I figured that holding for just one day may be as much as you can afford. I took all the data from MAD MONEY STOCK SCREENER - a website that tracks all the recommendations made since 2016-04-18. Every day after the show they update it with a new set of stocks mentioned in the show. The Setup There were 13,314 buy recommendations made by Cramer since 2016-04-18. Every day I'm taking $10,000 and putting them into all the buy recommendations distributing the amount equally among all the stocks recommend. Buying at 9:30am next day after the show and selling by EOD. To make it a more complete assessment I ran a couple of different variations No Stop Loss 10% Trailing Stop Loss 5% Trailing Stop Loss 4% Trailing Stop Loss 3% Trailing Stop Loss 2% Trailing Stop Loss Example Setup of a Backtest Up in a good year and down in a bad year - looks pretty average... Note that 2016 only has data starting from the end of Apr so it's not complete, similar for 2022 it's up to March. 2016 - 2022 Results Beyond the Results Since the results were not impressive, I decided to do one more test and hold a bit longer - until the next day open. Buying and 9:30am next day after the show and selling at 9:30am on the next trading day. A much better play this time. Holding 1 day + overnight (until the next day open) I'm not affiliated with CNBC or Jim Cramer in any way and this study is just a quantitative analysis of the recommendations.
Dollar Cost Averaging vs. Buying Every 5% Dip in $SPY It's reasonable to save some money every month and put that into stocks, you may be doing that in the retirement account already. Would it be more reasonable to wait until there is a dip and only buy then? Here I compare the 2 strategies: Dollar cost averaging: every month buying $1,000 worth of $SPY Every month saving $1,000 and then buying every 5%+ dip in $SPY with ALL money saved Results of doing than consistently since 2012 are below https://www.facebook.com/video.php?v=805286947530642
Is it better to buy before stock split or after the split: a quick study A stock split is a corporate action that companies take to increase the number of outstanding shares and decrease the value of each share. In other words, as a company's stock price increases, investors are rewarded with higher returns. A stock split attracts a lot of attention, media writes about it, people talk about it. It may be a sign that a company is doing well because its share price has increased, and it also could bring in new investors who are attracted to the more affordable share price. On the other hand, it also could cause some volatility in the stock, so you may want to be prepared for changes in the price. In this quick study I'm trying to quantify if it's better to buy the stock before the split of after the split. The Setup Buying and holding $10K worth of shares 1 month before the split and 1 month after the split No stop loss (holding for 1month no matter what) Only buying if the split was 2 for 1 or more Example Strategy SetupNotes: There was about 200 splits since 2016. There were some very low trading volume stocks which register like 1 trade per day or even 0 trades - I'm ignoring these in the calculations. Also here I'm assuming that you know about the split 1month in advance which may not always be the case. The Results: Seems like it's way better to buy before the split. At least it has been like that since 2016. Disclaimer: all the calculations made in https://www.breakingequity.com/ Not financial or investment advice.
Shorting Into the Rate Hikes, $SPY and $QQQ Historical Study We live in the world of anticipated rate hikes. The stock market does not seem to like that at all. Although there are many other factors such as war, unprecedented inflation, maybe even echos of pandemic I wanted to see how $SPY and $QQQ performed historically in the short term after the rate hikes. To do so I have backtested Rate Hikes back from 2015-2018. Overall there were 9 hikes (I took data from bankrate website) 1 x 0.25 in 2015 1 x 0.25 in 2016 3 x 0.25 in 2017 4 x 0.25 in 2018 In this study I have backtested 2 strategies. Each strategy trades/invests $10K every rate hike. Strategy 1: SHORT on the announcement date and hold 1 week Strategy 2: SHORT on the announcement date, exit EOD, repeat for 1 week The Results Shorting every day and closing the position EOD came out a bit better overall. It also protects you from sudden spikes overnight. SPY: $1,658.7 total gain vs. $1,626.9 for 2015-2018 QQQ: $1,634.0 total gain vs. $1,353.3 for 2015-2018 Below is a breakdown by each year Disclaimer: Do your research and due diligence before trading or investing, especially shorting.
What happened to $SPY and $QQQ on the days after 2% intraday drop, a historical view The days when the indexes drop 2% or more during the day are painful. Here is a quick study on $SPY and $QQQ since 2017. Long at open the day after 2%+ drop from intraday high to close. So we buy at open and sell at close the next day after 2%+ red day. The Result Up most of the times during the trading hours on the next day... $QQQ seems to be more rebound ready. This week feels like the red can continue forever.
Why only hold for 1 day? Why only buy QQQ/SPY -- what is your money in the rest of the time? I've seen studies (a couple years ago) to buy TQQQ at open the day after only a -1% dip, then sell at close 2 days later. Other times stay in SPY/QQQ. (backtesters seem to use SPY instead of VOO).
What if stock market was a game? Inspired by Mortal Kombat. Turning Wallstreetbets, Cathie Wood, Jim Cramer and Warren Buffet's trades into fights. The game is playable at https://game.breakingequity.com/ Please share your feedback and suggestions for improvements.
Strategy of the Day: Anything Too Hot Has to Cool Off The setup: - 3min chart - Small cap biotech stocks from FINVIZ.com - Up 30%+ on a prior day - Short below EMA 9 in the morning - Exit EOD or above EMA 9 The Results: Bear Market 2022 results are kinda expected with ~78% gain but 2021 are just out of this world. --- Not a financial advice. Trading involves risk, especially when shorting small cap stocks. Always do your research and due diligence.