This futures trading room focusses on high leverage Overnight Trading with futures:
“Just open the trade at the close and, if not stopped, close it at the open.”
One of the main advantages of the Nightly Patterns trading style is that it gives traders the opportunity to trade at a specific time, avoiding constant market screening. Furthermore, it allows traders to keep their money in cash during the day, making it possible to add Overnight Trading to other Intraday Trading strategies. Its unique time horizon makes this trading style completely uncorrelated to most other strategies, leading to superior portfolio diversification.
To download the results excel sheet follow this link: TRADING RESULTS
Have a look at my over 400 PATTERNS library following this link: PATTERNS LIBRARY
This picture shows NIGHTLY PATTERNS’ backtested equity growth back to 1993:
Below you can see total gains and net gains with live trades since October 2012:
I considered Interactive Brokers fees of $0.85 per trade per contract.
If you find something better, (including costs and fees) just write me. I’m always looking for new strategies to add to my portfolio.
If you want to subscribe NIGHTLY PATTERNS follow the procedure here:
If you are interested in Nightly Patterns’ KNOWLEDGE,
here are my Quantitative Guidebooks:
SYSTEMS
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“I search nightly patterns like people in the north look for Aurora Borealis.”
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Stock markets are in trouble.
My view on the markets outlined here, was confirmed on August with Treasuries yield curve inversion. This is a very old and effective recession forecaster. Another good ingredient for our stock market crash recipe.
Another great trader, Sven Henrich, explained current stock market pattern in one CNBC interview:
On that interview, he shows my same view on the stock market. It looks great!
Another trader, Banana3 on Stocktwits, strongly argues against Sven’s and mine forecast.
Basically here’s his theory:
From his perspective, we should see a third break and up trend.
Well, it looks like both previous instances broke up. As this pattern can break up or down, I think the third time is the right time. That’s where the stock market waits for us for breaking down.
Marco Simioni
Nightly Patterns
“Nobody cares about the monthly bar chart.”
If we look at the monthly chart above we can clearly see how from the current stock market top (Emini chart) of 3029.5 to 2007 high of 1586.75 and 2000 high of 1574.25 there’s about 50% difference (calculated on last market high of 3029.5).
Why should we see the market down that far?
Well, there are 5 great technical and fundamental reasons:
1 – The most strong support in the monthly chart is on those 2 great monthly highs mentioned above (it took 13 years to break that resistance, from March 2000 to May 2013).
2 – The trend line that starts from 2009 lows and had been touched in 2011, 2016 and December 2018 should be broken. Nearly all trend lines must be broken in technical analysis. This is a tremendous attraction factor.
3 – 50 day SMA must be broken someday. This is another tremendous attraction factor.
4 – There’s a great broadening pattern forming since January 2018. This should trigger the next big market movement.
5 – RSI5 indicator has a very steap bearish triple divergence triggered. Odds that these divergences break up are very little as we would need a steep long RSI5 trend like that one from October 2016 to January 2018. That’s too recent for the start of another one.
6 – Looking at fundamentals, S&P500 stocks are at least 30% overpriced. 20% more downside potential need to creat an oversold stocks regime.
7 – Last, I think the world entire stock and bond market is already in the Krugman’s liquidity trap. Why should the Fed cut rates while the stock market has been collecting new highs month by month? With future negative interest rates and quantitative easing back on our shoulders, I think at the end we shall see the famous Fridman’s Helicopter Money in action…
I could be wrong… It’s not easy to time the tops. Let’s see.
That’s all folks!
Marco Simioni
Nightly Patterns
I am pleased to announce a very interesting webinar on Nightly Patterns!
I want to thank Maurizio Monti, experienced trader and editor at Traders’ Magazine for holding this great webinar!
Only for italian speakers!
Vi aspettiamo questa sera:
Martedì 23 luglio alle 18, su Borsa Webinar
Marco Simioni
Nightly Patterns
“Once a year…”
Many traders ask me when it’s better to start trading a system, or when may they start trading Nightly Patterns.
That’s a very hard question. I feel good when we are earning and winning like everybody else in the world. Anyway, when the equity curve of a system makes new highs it’s not the best time to start or increasing equity exposure.
The best time to start trading a strategy is at its drawdown bottom. But how can we fix it?
I tried moving averages, linear regression, and Bollinger Bands. Bollinger Bands looks to be the most effective on timing Nightly Patterns equity curve. I went back to Nightly Patterns inception in October 2012. We trade ES future, but I considered SPY in this backtest because I use it for searching new patterns and getting trade signals (that’s why it’s only 37% cumulative return since 2012 in the chart).
Here’s the legend of the chart above:
- Blue line – Cumulative SPY Nightly Patterns % returns equity curve
- Yellow line – 20 SMA of the Blue line
- Green line – 3 standard deviations above band
- Red line – 3 standard deviations below band
Well, I highlighted with a grey circle the 5 times Nightly Patterns equity curve have touched the red Bollinger Band.
Now we are right in the 5th time, so if you are waiting outside the lines, now it’s a great time to start! (or to add equity exposure…) This is a “once a year” big chance!
Marco Simioni
Nightly Patterns
“Somebody must come in… We want them to play here!”
“CHICAGO, May 6, 2019 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, announced the successful launch of its new Micro E-mini futures on the S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average indexes, which became available for trading today.”
It’s great to have such a small tradable ES future. It makes it easier to adjust positions and it leads us to much more effective money management strategies.
Let me ask an easy question: what’s happened last year (December 2017) after Bitcoin futures were introduced in the CME board? Well, when big amounts of new liquidity comes in a market the potential volatility increases dramatically.
If there’s a bubble, the bubble bursts!
Let me ask another question: what’s happened on September 1997 when the E-mini futures were created? Well, there wasn’t a bubble.
Smaller futures contracts mean that many small traders can now affort to enter the market, both long or short. They are always doing the wrong thing. Buying greed and selling fear. On the contrary, big hands, institutional traders and investors, do the right thing.
When small traders came in late 1997, they helped to create the Dot-Com Bubble, because we were not in a bubble.
In late 2017, during the last Cryptos markets big bubble, big hands coming in recognised the too big bubble and made it burst shorting futures. The panic started and small cryptos traders started to sell their cryptos for what it has shown to be something like a 90% bear market in cryptos.
What’s happening now with the launch of the new Micro Mini Futures contract? Where are the big hands in the stock market? They’re already long since 2009. The day of the announce is very close to the all time stock market highs. They have been in the market for more than 10 years now. And they are looking to get out of it. Somebody else (small traders) will be long for the next big bear market coming.
Just another story. Let’s see the future”s” markets!
Marco Simioni
Nightly Patterns
I wrote last week a post on intraday versus overnight stock market correlation. You can read it here. There’s a further step now: investigating on Nightly Patterns returns vs stock market daily returns.
Is Nightly Patterns doing better than simply entering all nights explored on the last article in terms of correlation?
And second question: is Nightly Patterns doing better of just entering all days in the market (like a buy and hold strategy) in terms of correlation?
The main problem to deal with is that Nightly Patterns doesn’t trade all nights. It only trades on average 1.5 trades per week. How can it be compared to daily stock market behaviour?
Simply comparing monthly returns of Nightly Patterns (trading SPY instead of ES or Emini) and SPY monthly returns.
That’s an easy magic trick!
Here’s the big magic number: -0,1865
Correlation is more than 10 times negatively correlated than last article’s one! This results is due to the high selective power of Nightly Patterns.
And what I like most, if you look at the chart above you can see that the correlation is always below 0. Furthermore, in the last few years it has been steadily around its average of -0,1865. Here we are!
Marco Simioni
“Why should a trader approach overnight trading?”
Before looking at potential high returns, I would answer:
“Because of its correlation to intraday stock market movements!” I would reply.
What does it mean? The greatest strategies or systems to add to a portfolio of strategies or systems are those uncorrelated or negatively correlated to the general performance of stock markets. This is the only way to unveil the Shannon’s Demon. Especially those uncorrelated to the intraday stock market returns. One of the best proxy for the stock market is the SPY etf.
Here’s the big number: -0,017
That’s the correlation between all nights and all intraday returns since SPY inception in 1993. It’s slightly below zero. It means the overnight session is not correlated at all with the intraday session. It’s like a two uncorrelated stocks portfolio!
That’s all folks!
P.S. In the chart above, intraday returns are on X asses and overnight returns are on Y asses.
I’ve read it now, but I’ve been profiting with it since 2012!
Have a good read,
Marco Simioni
There’s something in the air…
When we come to new all time records and White Swans, they can behave in strange ways. Sometimes the extreme event fails to revert back to norm. Like it happened last week.
Today I was reading something about the potential commercial tech cold war among China and US.
We are used to this kind of articles. Anyway the recent poor overnight performances showed 14 nights with a total performance of more than -8% loss on SPY. It’s a huge overnight loss. It looks like the markets believe in this potential tech cold war.
Are we facing a new global recession and big bear markets?
Including today, looking back to 1993 (SPY inception), there are only 20 similar events. 19 of them are included in the 2 big bear markets of 2001 (in September) and 2008 (in October). Only one instance occured in 2011.
To sum up, there are 95% odds of being at the start of a 50% or more big bear market like those of 2001 and 2008. On both it happened at the final stage of the bear market. Now we are coming down from all time highs: this time it should be different.
This is what the stock market is telling us. Let’s wait and see!
Marco Simioni
There’s something out there… A White Swan is coming!
China has finally reacted to Trumps export duties. Is the commercial war starting today? Nobody knows… The only thing we know is what the markets are doing now: crashing overnight and going sideways or up intraday.
SPY gapped down for 6 nights in a row today. This is not unusual. What is completely new is that SPY lost about 5.81%, summing up all these 6 nights. This is a bearish record performance back to 1993. It has never happened for more than 26 years (since SPY inception).
It only happened once (March the 16, 2011) that it lost more than 4.5% but less than 4.75%. It has been followed by 4 up nights in a row with a total of 2.81% of return. I’ll keep it in mind for the next 4 nights.
I call these events “White Swan” because we know how they are and that they may happen in future. I would now say this to be a “Black Swan”. You should not be able to describe the Black ones before they happen… anyway for the White ones it should be easier!
Marco Simioni
Marco Simioni