1% up or down days at the open

In the past 250 days of trading, there have been 25 days where the market opened up or down by 1% or more. Today and yesterday were two of them and there have been quite a few lately. I have noticed that most of these days, especially lately are a fade (do the opposite, sell when it is higher, buy when it is lower).

To test that strategy, I programmed it in TradeStation to buy when the market is down 1% and sell when the market is up 1% and to enter the position the next minute after it starts to go my way. I used simple position sizing of 1000 shares of SPY with $.007/share commissions each way (what I'm paying now). The cover strategy is simply after 30 minutes to get out of the positions.

Over the past 250 days, excluding interest from not being in the market most of the time, you would have made 7,490 with a profit factor of 3.55(4.35 long, 2.7 short) with 52% profitable (50.00% long, 54.55% short) and the ratio of average profit to average loss would be 3.27 (4.35 long, 2.25 short). In other words, this strategy is right most of the time and the profits are much larger than the losses.

If you wanted to hold positions longer and just sell out some time after holding it thirty minutes when stochastics give an indication to cover, there's a profit factor of 3.68 (3.32 long, 4.91 short), but you are right 68% of the time (71.43% long, 63.64% short) and unfortunately the profit factor decreases to1.73 (1.33 long, 2.8 short). You would be making 11,590 over the entire period which is about 4 grand more for a very simple change.

With the SPY, 1000 shares would require at least probably 35k in margin to be able to trade it and you could get about a 33% return just trading this strategy (not including interest) over the course of a year. A more complex exit strategy could hold longer or start taking profits to reduce the draw down that can occur. Nevertheless, I find it interesting that this strategy (at least for a relatively small amount of money) could be this successful.