In this post we’ll take a look at the backtest results of opening one IWM long day trade position each trading day from Jan 3 2007 through May 8 2020 and see if there are any discernible trends. We’ll also explore the profitable strategies to see if any outperform buy-and-hold IWM.
There are 15 backtests in this study evaluating over 13,400 IWM long day trade equity occurrences.
Let’s dive in!
Systematically day trading is an unprofitable strategy.
Systematically trading overnight outperforms buy/hold with regard to total return.
- Symbol: IWM
- Strategy: Day Trade (positions are held for 24 hours or less, ignoring weekends)
- Days Till Expiration: N/A
- Start Date: 2007-01-03
- End Date: 2020-05-08
- Positions opened per trade: 1
- Entry Days: daily
- Entry Signal: N/A
- Timing: 9:00am ET and/or 4:00pm ET
- Overnight (open position at market close and close at market open)
- Intraday (open position at market open and close at market close)
- Buy/Hold (open position at market open and close the following market open)
- Trade Entry
- Trade Exit
- Margin requirements are always satisfied
- Margin calls never occur
- Margin requirement for all positions is 30%
- Prices are in USD
- Prices are nominal (not adjusted for inflation)
- Commission to open or close positions is 0.00 USD
- Slippage is calculated according to the slippage table
- For comprehensive details, visit the methodology page
Compound Annual Growth Rate
Max Drawdown Duration
Opening a position at the Monday morning bell and closing it at the Tuesday morning bell outperforms a total return buy/hold strategy by 1.6% with nearly 86% less time in the market.
The mantra of buy and hold investors is: “time in the market beats timing the market.” It appears there may be some exceptions.
The challenge is that the exception works until it doesn’t. Meanwhile, it’s not possible to discern when it’s no longer working until relative losses have been discovered by backtesting / looking in the rearview mirror.
We can actually see this exception in action. Take a look at the Tuesday buy/hold strategy on the equity curve graph in the section above. It experiences massive outperformance but then stalls early 2014, trending flat-to-down for the next 6 years.
Around the time of the stall the Tuesday overnight strategy begins to trend upward.
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