I am testing simple ideas on index futures (Dow Jones, S&P, Nasdaq), in order to eventually come up with a few simple systems (2 or 3 lines in easylanguage) rather than just one very elaborate system. If anyone has simple ideas that might work, I am willing to code them and test them on many years of data. I have already created one such system, based on the short-covering that happens in the last 5 minutes of trading before the close. Other simple ideas that I have tested are: whether there tend to be reversals at specific times of the day, and whether a gap at the open gets closed and how risky it is to bet on it.
Hi Travis I've been working on premarket gap strategies for a while now. I like to trade large gaps down. Unfortunately, with my list of nasdaq stocks, they don't occur very often lately. My latest strategy is to use a two minute chart and the parabolic sar. I wait for the sar buy signal after the open combined with a red symbol or down move to the bottom of the bollinger band to buy in. Because of the scarcity of large premarket gaps down, I am increasing my list of stocks to watch by about 50% on Monday. I'd be very interested in what your tests on premarket gaps show.
Every day before the open, place a limit order to buy at (0.92 times yesterday's close). If you are filled, hold the position overnight and exit at market on the next day's open. If you are into "optimization", this system has two optimizable parameters. The first parameter is the buying threshold (0.92) and the second parameter is the # of overnights (1) that you hold before exiting at market on open. Good luck!
Test when BBands are very tight and OBV turns up. If you do test this, please let me know your results.
Not all of these systems are as simple as I wanted them, but I could test some of them, and as soon as I do, I will let you know the results. Thanks to everyone. Also, if anyone - I am sure there will be more than one - tries coding and testing these ideas, I invite them to kindly let us know the results.