This is the alert I sent out last night:
If SPY closes above yesterday’s close at 210,13 and today’s volume is higher than yesterday’s one,
the following patterns will trigger:
SHORT PATTERNS 23-32-35-73-99-143-224-230-234-261
If that happens, I will enter SHORT.
SPY missed the rule so I sat out. Anyway, it would have been a good short profitable trade.
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This mathematical effect goes back to its discoverer Claude Shannon:
Markowitz portfolio theory is entirely based on the Shannon's Demon Effect: a portfolio of financial instruments or trading systems can beat the average return of all its components only if their correlation is low or, even better, is negative.
These computational effects are also stronger the often the portfolio is rebalanced.
This incredible edge coming from diversification can even transform a two systems portfolio with negative returns in one single low correlated and frequently rebalanced porfolio with a positive average return.
In this file:
I show how overall results are boosted by Shannon's Demon with 3 simple strategies that are rebalanced daily. One buys long each night from close to next day's open, one from close to next day's close and one from open to close (intraday). It is clearly evident how much overnight trading has a low correlation with other time frame strategy proxies and why it should be included in a trader's portfolio.
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Marco Simioni
NIGHTLY PATTERNS - Overnight Trading
Hi Marco, Do you happen to have the results for your system if one were to exit at 2 min before the open as in the rules? thanks, -Russ Date: Fri, 20 Feb 2015 16:34:45 +0000 To: gc7x@outlook.com
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Hello Russ,
Well,
entry 2 minutes before the close at 2095,75 and exit at 2 minutes before the open at 2089,5
We would have had 6,25 ES future points of gain with a short trade, 0,3% of ES movement, than effective % gain it’s up on your leverage and margin. But it was just below the close and so some bearish patterns would not have triggered. If you are aggressive enough, you could have taken this trade.
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