Is Holding Overnight A Good Idea?

August 21, 2019

Who likes holding trades overnight?

I’m sure long-term investors do.

I’m sure they could care less about holding their trade overnight for days, months, or years.

But what about the rest of us?

Who really wants to take a day trade, get into profit, and then roll the dice it won’t plummet at the next open?

Or who really wants to take a day trade, see it start to tank, and then roll the dice it won’t plummet farther at the next open?

That’s such a nervous, awful feeling.

What’s the solution?

Don’t hold anything overnight, of course.

What’s the problem?

According to research, all the money in the market is made when the market’s not open.

Not some of the money. ALL of the money.

According to various studies, all the gains in the U.S. stock market has come from positive overnight holding. If you only traded during the day and held nothing, you make no profit. If you only bought at end of day and held overnight, you make all of the gains.

In short, “intraday trading returns tend to be around zero, while night gains, from market close to next day open, are consistently positive.” (from a 2018 article on Fast ML).

Why is that? Why is it so much more profitable to hold overnight?

Here’s the fun part: no one knows! It just works out that way.

This, of course, leaves us with a conundrum. We don’t want to hold our trades overnight, but there’s potentially a ton of profit in it if we do.

How do we get out of this jam?

First, keep in mind that this research in on the stock market. I’ve never read anything like this regarding the Futures or Forex markets.

Maybe this rule doesn’t apply. Maybe we don’t have to hold our trades.

Second, don’t ever read articles like this and believe them without question. Always do your own testing. I’ve seen so many articles over the years proclaiming some researched truth that ends up being not true at all.

So, we’re going to look at a few systems this week that start on Friday and hold through the weekend. That’s more than one day of holding, which is the scariest scenario imaginable.

And we’ll look at the Forex market because that’s the market that gives us the longest overnight period.

We’ll see if there’s anything to this overnight advice.

Talk to you soon.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.