Tactical Time-of-Day Trading Strategies

I’ve got something a bit different for you today.

A trading strategy based around “time of day”.

Before we go on, I want to state that this is me playing around and sharing my findings.

Don’t take it as a recommendation to use this strategy, past performance doesn’t mean it will continue. AND I could have messed up the whole thing anyway, so assume it’s wrong.

Okay? Okay.

So, I have a custom tool that lets me test trade entries and different times of the day.

• I can test going long for the last hour of each day.
• Shorting the first 30 mins on a Tuesday
• Staying long all day on a Friday

Things like that. It’s a pretty simple tool, but I like to look for themes.

My strategy is:

If I can find a time of day or even a day that has a particular bias I can use that data, add a layer of price action and or chart patterns on top, and improve my edge.

I think you get the idea…

Right, so what did I find?

I started exploring the concept of “turnaround Tuesday” ie, does the market perform strongly on a Tuesday? I didn’t see anything super obvious, but I have more to explore. (I’ll update you when I do.)

But I stumbled upon something else. I figured out that going long on Monday holding overnight and closing on Tuesday’s open was pretty good.

I tested this using SPY, which is the ETF for the S&P 500. Just to make it easy to analyse rather than use a 24hour traded CFD product. I used a 500-share position.

Rules:

• Go long at 15:50 EST (10 minutes before the US closing bell)
• Close the trade at the opening bell the next day (09.30 EST)
• Trade on Monday only
• No stop
• No target

These were the results from 1st Jan 2021 – 21st March 2023 (to capture 100 trades).

It’s also interesting to see that this was still a profitable strategy from 1st Jan 2022 when the market was heading lower (Buy and hold return was negative).