Friday, June 08, 2007
Evidence on Overnight Trading
Interesting evidence on why overnight trading and closing the trade within the first hour or so is a good strategy when using directional trading models like mine. In my experience, unexpected changes in direction are more likely to occur intraday so that one can actually take more risk overnight in direct contradiction of received wisdom and futures trading margin rules. I don't think Steenbarger's conclusion that the US follows overseas markets follows from this though. That would need a different kind of analysis, which I might do some time. Looking forward to trading from Australia I won't miss much by being asleep during the main part of the US trading day.
Subscribe to:
Post Comments (Atom)
2 comments:
In addition to the US following overseas markets (his conclusion), it seems to me that first hour trading is also reacting to overnight news (M&A, upgrades/downgrades, earnings, lawsuits, etc), so most of the real gains would materialize in the first hour of trading.
It's a fascinating graph he has there, nonetheless.
Yes I think it is mostly the macro news and earnings reports etc. which move the market and so not surprisingly the majority of that stuff apart from FOMC decisions and reports is happening out side the regular market hours. European market (especially London) s of course move in reaction to the US macro news so it could look like the US markets are moving in reaction to European markets - so a statistical analysis using something like Granger causality could suggest that there was more to a Europe-US causal relation than there is.
Post a Comment