Small overnight edges in EEM
Here’s a trade idea
Go long EEM at the close and sell at next day’s open if:
- Today’s close is at least 1% below 10 day simple moving average
- Previous overnight gain is less than 1%
Below is an equity curve assuming $100K per trade and no commissions or slippage.
And some stats…
I’ve attached an Excel file that allows you to adjust the parameters to see how performance changes as a result. Change cells N3 and N4 to try out different combos. Data is from Yahoo finance.
Download file here –> EEM Overnight Trade
This strategy works to a degree on other indexes but not nearly as good from my tests so far.
Posted on January 9, 2013, in Other. Bookmark the permalink. 9 Comments.
Thanks, Mike.
Do you have a theory as to why this strategy doesn’t seem to work as well with other indices?
I’m not sure why it would work better for emerging markets than some of the other stock indexes. I guess there are somewhat different dynamics at play. While strategies that work across funds are desirable, each market will have its own idiosyncrasies.
Great post. Have you read the paper ‘Tactical Equity Asset Allocation Model’? Here is the link: http://www.naaim.org/wp-content/uploads/2012/04/aaim-d.pdf I think this may help with your research efforts; it uses similar trading rules.
In response to Alex: this strategy seems to be a mean-reverting strategy which I have found to work better with EEM than many other stock indices.
Hi William, thanks for the link and reply to Alex. I haven’t read that paper yet.
Have enjoyed reading your blog, btw. Keep up the good work there!
Interesting.
Does it work, with appropriate rule changes, on the bear side?
Since 2007, the bear side has worked great too. Before 2007, there was hardly downside to the overnight trades making shorting the overnight a bad idea in that time period.
In case you are interested, there is an interesting overnight edge in AAPL and GDX (gold miners) with these rules: go long at the close if the open to close was positive that day, then reverse and go short at the open. Close at the end of the next day.
Nice. I’m familiar with the GDX edge but haven’t looked at AAPL. Thanks for sharing!
aapl works only since 2006, i personally would not trade it