Sometime back, Deepak had written about Overnight vs. Intraday moves on NIFTY, here’s the post. The premise of the post was that most of the up-moves happen overnight, i.e., through gaps.
If you look only at the intraday price moves, it skews more towards the downside. Meaning, more often than not, price closes below the open on an intraday basis.
To give you some numbers – if you look at all trading days, in the past 12 years, that’s close to 3000 days, you will notice that only 46% of days close positive intraday (Close – Open) vs. 64% of days close positive overnight (Day Open-Previous Day Close).
In this post, we will explore a slightly different question.
We’ll take a subset of Chase trades – The ones that go on for more than ten days typically, these are also the trades which make us money.
From that subset, we’ll look at both Short and Long trades to see when the money is made. Is it made during the day, or is it made overnight through gaps?
We looked at trades which held for greater than 10 days, since 2008. Ninety-one trades fit that criterion, of which 38 were on the short side.
Let’s start with Short trades
(Click to enlarge)
How to read this chart?
This chart tells us, of the 38 short trades, only in 4 instances that we see a significant contribution of gaps/overnight moves to the short trades. Look at the green bars on the down side, those are the only instances when down moves happened through gaps. Rest of the down moves happened intraday, as you can see more of grey bars on the down side.
The long trades
(Click to enlarge)
53 long trades fit our criterion.
We notice something interesting here, if you see most of the long trades benefit from both Intraday and Overnight moves. Both the the grey and green bars are up most of the time.
I call it interesting because, even though % wise the number of intraday positive closes are pretty low (46%), our long trades for some reason, seem to capture up-moves both during the day and overnight.
What does it all mean for CM Chase?
It means, being levered a little when the odds are in your favor is not a bad thing. When the Index is in an up-trend, as we can see, the up-moves happen both during the day as well as overnight and that’s when we roar.
To get access to Capitalmind Chase, and to our other model portfolios and slack access, subscribe to Premium. For a limited time, we are offering 20% off on the annual plan. Use Coupon Code CHASE20. If you’d like to try us out with a Quarterly plan, use Coupon Code CHASE15 to get 15% off.
