![\"End-of-day](\"https:\/\/optimusfutures.com\/tradeblog\/wp-content\/uploads\/2021\/06\/End-of-day-trading-strategy-.png\")
<\/a><\/p>\n- \n
- End of Day trading strategies are simple, easy, and often more practical to execute.<\/li>\n
- Developing a strong end of day strategy, however, can be difficult.<\/li>\n
- End of day strategies can be used for both day trading and swing trading.<\/li>\n<\/ul>\n<\/div>In 1987, a year fated to undergo one of the most harrowing market crashes, a successful but still up-and-coming trader by the name of Larry R. Williams took the futures trading world by storm, sealing his stature in market history and occupying a space alongside other legendary market speculators such as the likes of Jesse Livermore.<\/p>\n
He entered the World Cup Championship of Futures Trading where he turned his $10,000 stake into over $1,100,000 in just one year–an 11,300% return in a live market. His daughter, the famous actress Michelle Williams, also won the same contest ten years later, using a similar, though updated, strategy.<\/p>\n
In 1987, did Larry Williams trade every shift in the market, scalping profits along the way? Did microtrends play into his futures trading approach–one that might have kept him glued to his screen, day trading or swing trading the nuances of each micro trend?<\/p>\n
None of that applied. And one can argue that this very principle is one major factor that contributed to his success.<\/p>\n
Larry Williams traded one instrument–the S&P 500 futures–and placed only one trade a day upon opening bell. He placed a single trade daily based on End-Of-Day (EOD) data<\/strong>. And because of this simplicity, plus an exceedingly aggressive money management strategy called Optimal F, he was able to achive way above average results where he turned a 5-figure to a 7-Figure.<\/p>\n
(Disclaimer: The example is for illustration only. These are uniue and excpetional results. You should not expect such returns. There is a substantial risk of los in futures trading. Past perforamnce is not indicative of future results.).<\/strong><\/p>\n
What is End-of-Day Trading?<\/h2>\n
End of Day trading is the process of deciding on and initiating a trading position based on an assessment of the previous session\u2019s trading activity.<\/p>\n
It\u2019s simpler than it sounds: you take a look at the trading activity at the end of the regular market close, and you decide on going long or short the market (or take no position at all) at the market open either the following morning or overnight (if it\u2019s a 24-hour market).<\/p>\n
Doing it is easy. The \u201chow to\u201d part is much more difficult, as there are nearly countless strategies you can use to take a position based on EOD data.<\/p>\n
How to Trade Futures at Market Close<\/h2>\n
When Larry Williams traded the S&P 500 futures in the 1987 championship, he used what he described as a \u201cdumb setup.\u201d It wasn\u2019t the actual trading setup that made money, it was his use of a highly risky \u201cOptimal F\u201d money management strategy developed by risk manager Ralph Vince.<\/p>\n
We won\u2019t get into the details of his system, but a \u201csetup\u201d can easily be imagined by filling in the simple equation: If X happens, then go long or short, and close position at the end of the day.<\/p>\n
Here is one example of a strategy that any trader could have dreamt up (this is not a recommendation but a demonstration).<\/p>\n
If the market is trending down at the end of the day:<\/p>\n
- \n
- Open a short position and place a stop loss above the highest high in the day\u2019s session.<\/li>\n
- If there is a blowout day in your favor, don\u2019t initiate a position after the market closes.<\/li>\n
- Close the position at the end of tomorrow\u2019s trading day and repeat the process.<\/li>\n<\/ul>\n<\/div>Here\u2019s what that might have looked like on the YM from June 11 – 22, 2021.<\/p>\n
![\"YM](\"https:\/\/optimusfutures.com\/tradeblog\/wp-content\/uploads\/2021\/06\/YM-End-of-Day-Strategy.png\")
<\/a><\/p>\nHere\u2019s another example of a somewhat \u201cdumb setup\u201d that might or might not have relevance:<\/p>\n
- \n
- When the market has three up closes, go short the following day and close your position at the end of the day.<\/li>\n
- When the market has three consecutive down days, go long the following day.<\/li>\n<\/ul>\n<\/div>Here\u2019s what that might have looked like in the ES from May 5 to June 15, 2021.<\/p>\n
![\"ES](\"https:\/\/optimusfutures.com\/tradeblog\/wp-content\/uploads\/2021\/06\/ES-End-of-Day-Strategy.png\")
<\/a><\/p>\nAnd here\u2019s another EOD system to use as an example (or something to build on and refine):<\/p>\n
- \n
- When an instrument is trading above its 50-day simple moving average, go long on tomorrow\u2019s session every time today\u2019s session trades below yesterday\u2019s low.<\/li>\n
- Place a stop loss a fractional distance below the trigger session\u2019s low.<\/li>\n
- Close your position at the end of tomorrow\u2019s session.<\/li>\n<\/ul>\n<\/div>Here\u2019s what that might have looked like for the NQ from December 18, 2020 to February 9, 2021.<\/p>\n
![\"NQ](\"https:\/\/optimusfutures.com\/tradeblog\/wp-content\/uploads\/2021\/06\/NQ-EOD-Strategy.png\")
<\/a><\/p>\nIf you\u2019re looking to trade, or even day trade, based on end of day data, hopefully, your trading rules will be a bit more sophisticated and calculated than the ones in the examples above.<\/strong><\/p>\n
There are many ways to develop systems based on end of day data–from news trading<\/a> to simple trend following <\/a>(as in a few of the examples above) to candlesticks and much more.<\/p>\n
But this is where we\u2019ll stop, allowing you to develop your own coherent trading strategy<\/a>.<\/p>\n
Benefits of Trading End of Day Trading Strategies<\/h2>\n
1 – EOD Trading Doesn\u2019t Disrupt Your Day<\/strong><\/h4>\n
Sitting in front of your computer, eyes glued to your screen is a bit overrated; and that\u2019s assuming you can afford to spend your day scalping the markets<\/a>. If you\u2019ve got a business to run, then frequent intraday trading adds another layer of risk onto your plate–missing out on a trade and missing out on your business. EOD trading doesn\u2019t get in your way, making your day-to-day activities, along with your trading, much more efficient.<\/p>\n
2 – Less Stress<\/strong><\/h4>\n
IF (and only if) you\u2019ve developed a system that potentially returns more than it loses, and if you have the capital to let it run, then there\u2019s no need to do anything else other than wait for end of day data to implement the strategy. Having said that, we do not recommedn leaving any orders unsupervised, ragdless of the trading frequency of your strategy. You should alway stay alert watch for any type of connectivity that could be disrupted.<\/p>\n
3 – A More Affordable Alternative<\/strong><\/h4>\n
The death of a thousand stops, or slippages, or commission fees is something that every day trader has experienced at some time or another. If you\u2019re not careful, these extra costs can even exceed your trading profits, especially during a slow or low-return day.<\/p>\n
4 – Allows You to Capture the Bigger Move<\/strong><\/h4>\n
There\u2019s nothing worse than ending the day with a small profit or loss when, at the end of the day, the market had made a colossal move in only one direction, up or down. How\u2019d you miss it? Your frequency-based trading tactics prevented you from capturing a move that could have made a huge difference in your trading account. Perhaps, if you had held one position based on an accurate EOD reading–assuming that nothing in the markets disrupted your directional bias–you might have caught the entire swing. Trading frequency often fails to catch these monodirectional intraday moves. EOD trading is designed to catch them.<\/p>\n
Risks of Trading End of Day Trading Strategies<\/h2>\n
1 – Exposure to Negative Overnight Developments<\/strong><\/h4>\n
Let\u2019s suppose your market of choice is sensitive to certain foreign market developments and the market moves against you overnight, stopping you out of your position, only to correct itself back in your favor. If you open your positions the same day it closes–something you can do if your futures instrument trades on a 24-hour basis–then you\u2019re exposing yourself to overnight risk.<\/p>\n
2- Missing Overnight Developments<\/strong><\/h4>\n
Let\u2019s suppose you trade one of the US stock index funds, and you open your positions in the morning when their underlying opens in the stock market. What if the big move you were anticipating in the futures market already happened overnight? That\u2019s the risk of not exposing yourself to overnight moves.<\/p>\n
3 – Earnings Releases Post Market or Federal Reserve Speeches Post Market<\/strong><\/h4>\n
During earnings season, some companies report earnings after market close. If you trade a stock index futures instrument, you\u2019re exposing your capital to risk if an earnings report post-market goes against you (depending on the direction you take in the market).<\/p>\n
Meanwhile, Federal Reserve members often give speeches in foreign countries, the timing of which may not coincide well with the US (think after midnight in the US). Should any of the messages conveyed by the central bank shake the market, you\u2019re likely to miss it, which can be good (if it’s in your favor) or tremendously bad (if it\u2019s not).<\/p>\n
4 – Weekend Gaps<\/strong><\/h4>\n
One of the worst things that can happen to you is to hold an instrument into the weekend only to see it gap against you in a manner that puts you in a debit situation<\/strong>. -depending on how much capital you have in your account–when it happens, you\u2019ll have more than just regret…you may end up in debt.<\/p>\n
The Bottom Line<\/h2>\n
Trading EOD is simple and much easier to execute. The hard part, however, is in strategy development, capital requirements and very large drawdowns–not only your entry and exit setups, but the money management system you use to optimize it. There are hundreds of ways to develop an EOD futures trading strategy. It is just a matter of using your skill first and testing it with sound calculation.<\/p>\n
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