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2008issue C131-5

Evaluating a next-open entry after one-day corrections

A next-open long after a one-day washout is scored as three rules at once: a regular-session loss threshold, an overnight-direction filter, and an abstention rule when the overnight session does not confirm.

  • The corrective-recovery procedure takes a next-open long only when the prior regular trading session fell at least 1% and the overnight session then advanced.
  • If either session condition fails, the system does not enter, so the abstention rule is judged with the entry, not after it.
  • After an extreme regular-session loss, a declining overnight session left the next regular session mixed rather than systematically higher.
  • Washout depth was split from just beyond 1% through declines of 4% or more, and regular-session results were recorded for each of the next five sessions after a higher open.
Entries in this reading3 entries
Current trackSession analysis42 readingsMean reversion53 readingsRule-based entry292 readings

What the procedure does

The evaluated procedure takes a next-open long only when two session conditions agree. The prior regular trading session must be a single-day correction, a regular session that finishes at least 1% below its open. The overnight session must then advance. If either condition fails, the procedure does not enter.

That pairing is the corrective-recovery procedure: a rule-based long that enters at the next regular-session open only after a qualifying washout and a positive overnight print. When both conditions are met, the specified action is a long at the regular-session open at 9:30 ET. The overnight print is a filter. The regular trading session is the holding window.

How the sessions are defined

An extreme loss is defined as a regular-session decline of 1% or more. The regular trading session is the cash-session change from the 9:30 ET open to that day's settlement, measured as today's close minus today's open.

The overnight session is today's open minus yesterday's close, the gap from the prior settlement to the next regular-session open. It is used as a participation filter rather than as the trade itself.

Why overnight direction is a filter

The overnight-direction filter allows the next-open long when the overnight session advances and blocks it when the overnight session declines. After an extreme regular-session loss, a declining overnight session left the next regular session mixed rather than systematically higher, which is why overnight direction is treated as a participation filter.

The abstention rule is to stand aside after a qualifying washout if the overnight session does not confirm. The system is judged as entry and non-entry together.

How the sample was split

In a 786-session sample, 102 regular sessions met the extreme-loss threshold. That is about 13%, or roughly one day in eight.

Next-session outcomes were tabulated by a loss-magnitude split. Qualifying washouts were grouped by prior regular-session loss brackets from just beyond 1% through declines of 4% or more, so deeper declines could be evaluated separately from milder ones. Washout depth was evaluated separately from the overnight gate.

After a washout that opened higher, regular-session results were recorded separately for each of the next five sessions, not only for the first day.

Limits stated in the evaluation

The evaluation states that a rebound tied to short-term fear may stop working as that fear fades. It also states that the sample came from a rising-market stretch, and that the same session pattern need not hold if the market regime changes.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
12 of 18 in the Session analysis track
201026-30 pp.Next on Session analysisSession range share: currency futures versus the mini indexIn October 2009 a five-point mini S&P objective was about 26 percent of that contract’s 19.27-point average daily movement.
All readings on this track · 18 readings
  1. 1990Constructing a second-hour session residual exponential index
  2. 2000Treat an open limit book as an execution filter
  3. 2002Constructing a long, short, or flat pre-trade checklist
  4. 2003Session-window trims for mechanical day-system evaluation
  5. 2004Overnight session entry rules after regular hours
  6. 2005Overnight and regular session execution in Nasdaq 100 names
  7. 2006The intraday workspace as a combined decision procedure
  8. 2006Same-session trading needs presence and next-signal rules
  9. 2007Session filters for moving-average entry rules
  10. 2008Related-market checklist, session filter, and ATR-scaled stop
  11. 2008After-hours session regimes and the next-day close
  12. 2008Evaluating a next-open entry after one-day corrections
  13. 2010Session range share: currency futures versus the mini index
  14. 2011Dollar travel, afternoon sessions, and a 1:2 first-loss bound in equity-index futures
  15. 2012Last-hour volume breaks with a first-hour exit
  16. 2013Same-session and multi-session trades as one rule-based procedure
  17. 2015Session clock bars from public quote feeds
  18. 2016Session-gated moving-average entry construction
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