Wednesday, October 08, 2008

Sell Fridays (and Mondays)


Sometimes you get this gnawing feeling while watching the markets in 2 minute bars that there must be an easier way. I've also noticed while fiddling with the Cheaphooker settings that Fridays haven't shown a lot of green for the past year so I ran this little test to confirm my suspicions. This data is for the last 50 weeks, since I was really only interested in seeing how market risk has been managed from the 2007 Fall highs (little play on words there).
Turns out Fridays are a great day to be short, at least in the Qs and the IWM.
I like this risk/reward and the # of consecutive losers for both examples, but the Qs model is the more attractive of the 2 for my money.
Feel free to scan a larger universe of indices and ETFs, or your trading favorites and post results as comment, if so inclined.
The code couldn't be much simpler. Here it is in TS2000i, but you don't even need a computer to trade this system . . just call in the order.

If DayofWeek(Date) = 4 Then Sell Next Bar at Market;
If BarsSinceEntry = 1 Then ExitShort This Bar at Close;
The comment keeps coming up, how do you accomplish "This Bar at Close" executions. With Schwab StreetSmart Pro I just set an Alert to place the trade at any designated time . . in this case 12:50 pst. Platforms without MOC orders (market on close) or a timed trading execution feature may require you to monitor the trade into the close and execute manually.

9 comments:

Big Sal said...

Hello my friend, I have been reading your blog for several months....excellent job! Can you elaborate on what this means or refer me to one of your posts that explains this:

If DayofWeek(Date) = 4 Then Sell Next Bar at Market;
If BarsSinceEntry = 1 Then ExitShort This Bar at Close;

Thank-you so much, Sal

bill said...

bzb,

did u mean sell on friday morning and close on monday evening.

bzbtrader said...

Bill,
Your analysis is correct. I probably should have labelled the system "sell Friday and Monday."

bzbtrader said...

Sal,
This is straight TradeStation 2000i code.
Day of week=4 means Thursday.
Sell Next bar at Market means go short at the next day's open.
BarsSinceEntry means how many days have pasted since the postion was entered.
ExitShort This Bar at Close means cover the short position at the end of the day.
Hope that helps.

bzbtrader said...

Bill,
As a further followup on your comment. . $1000 of the Qs trade gain is made on Fridays, while $1600 is made on Mondays. As an alternative, you could just sell Mondays with good results, less risk exposure, and considerably lower drawdown.

Big Sal said...

BZB,

No need to post this on your blog if you don't want to as this probably reveals the idiot that I am. Is this strategy to buy a put on the QQQQ Friday mornings 9:30 and then sell it on Monday at 3:55?

Thanks!! Sal

bzbtrader said...

Sal,
In this game there are no dumb questions as one man's assumption can quickly become another man's misconception . . and the consequences can be costly. This blog is about helping you to trade, not about confusing you.
Buying a put on Friday's open is a valid approach to utilizing this system.
Another tactic is to sell a naked call, if your account permission allows. This tactic lets you benefit from weekend premium decay, but involves considerably more risk exposure.
Option values in non-volatile markets often reset for Monday's premium decay mid-afternoon Friday, which is another (non-quantifiable) factor to consider when using optiions for this system.
The performance results posted on the blog reflect selling 100 shares of the underlying QQQQ, which is the tactic I personally favor.

beanieville said...

The gap fades has much higher probability of success than this sell on fridays/mondays.

But good observation.




Beanieville

bzbtrader said...

beanie,
I'm well aware of the power of gap fades. .they are basically my bread and butter trades, as I have noted many times. The objective of exploring various systems since my Seeking Mr. Goodbar series began back in May is to create a basket of systems that can be applied to a single ETF, or a small basket of ETFs, in order to mimimize risk and at the same time capitalize on both trending and trading range opportunities over a few day trading period . . which for me is long term.