Be alert to big minimums on Monday as they tend to reverse !
When Vic the Chair writes something , we generally tend to read the article twice at minimum. The 4th point in this 22 Things a Man Should Know About Trading, from Victor Niederhoffer “Be alert to big minimums on Monday as they tend to reverse” caught our attention and we tested that hypothesis on a lazy Sunday
Be alert to big minimums on Monday as they tend to reverse – trading system study
for the sake of simplicity we took big minimums as a 2% down day on Monday , and here are the trading rules we applied to test that hypothesis.
- Today is Monday &
- $SPY falls by more than 2% in the day
- Go Long at close &
- exit four days later ( i.e exit the position by the weekend)
Below the backtest performance summary for Go long when $SPY falls by more than 2% on Monday and exit four days later
|Date||Loss %||Change after 4 days||Change % after 4 days|
with an outlier adjusted factor of more than 2 , and despite loosing -15.5% on the largest single loosing trade , the average profit % per trade stands at 1.6% for a four day holding period , next time do keep an eye on those 2% or more drops on $SPY on Mondays when everyone else is panicking !!
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