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The S&P 500 Night Rider strategy

Description

This day trading strategy trades after the US “closing bell” at 22h00. The strategy’s underlying assumption is that many long-term investors do not follow the market during the day. They wait for the closing price, and make their decision. The closing price can often trigger strong reactions from the bigger market participants.

The S&P 500 Night Rider strategy was designed by trader Domenik Maier. He described his favourite strategy in an article in the Traders’ magazine.

Suitable for : S&P 500 market index
Instruments : Futures and CFD-Forex
Trading type : Day trading
Trading tempo : Slow
Using NanoTrader : Manual or (semi-)automatic
 

When to open a position?

The fact that the trading signals appear late in the evening is not a problem. Simply use the AutoOrder function in the NanoTrader trading platform (free demo). The platform will take care of the rest.

For a buy signal to occur, the market must be in a positive (bullish) trend. If the market price is above the 50-day moving average, the S&P 500 Night Rider considers the market to be bullish. This filter will colour the chart background green when this condition is met.

In essence the strategy requires a specific price pattern to occur over a period of two days.

  1. Day 1: The daily candle closes in the lower half of the daily range (15h30 to 22h00).
  2. Day 2: The daily candle closes in the upper third of the daily range (15h30 to 22h00).
  3. A long position is bought if the price moves 1 tick above the high of day 2. In most cases this happens during the night session of day 3.

This example shows a typical buy signal. The blue lines represent the high and low of the main US session (15h30 to 22h00). The dotted line divides the daily range in two halves. The red and green bands are based on the opening price and the closing price of the main US session. Green, indicates a bullish day (close above open). Red, indicates a bearish day (close below open). The chart background is green which means the market is in a positive (bullish) trend.

On the first day the market closes in the lower half of the trading range. On the second day the market closes in the upper half of the trading day. On the beginning of the third day a long position was opened when the price moved 1 tick above the high of the second day (green vertical line).

Trading the S&P 500 actively after the market close.

For a short sell signal, simply apply the reverse logic.

This example shows a short sell signal. The market trend is bearish (red chart background). On the first day the market closes in the upper half of the daily range. On the second day the market closes in the lower half of the daily range. A short sell position is opened when the price drops 1 tick below the low of the second day.

A good trading strategy for the SP500 market index.

When to close a position?

The S&P 500 Night Rider uses a simple stop loss and a flat filter. The flat filter closes the position before the end of the third day.

This example shows a long signal. The S&P 500 Night Rider bought a position after the close.  The market price goes up, as expected. The stop loss (red horizontal line) is never touched. The position is closed by the flat filter at the end of the third day.

Automated trading signals for the US market index.

This example shows a short sell signal. The S&P 500 Night Rider opened a short sell position. The market price does not go down. The stop loss (red horizontal line) is hit and the position is closed.

Traders' Magazine trading strategy.

Practical implementation

Using the NanoTrader follow these steps:

  • Open the chart of the instrument you want to trade.
  • Select the template study "WHS S&P 500 Night Rider” in the "WHS Strategies" folder.
  • For semi-automated trading, activate TradeGuard+AutoOrder in the chart. For automated trading, activate AutoOrder in the chart.