The idea of trading on a Friday has been put to us dozens of times over the years in many different ways. We’ve been asked why a good portion of our trades land on a Friday. We’ve been asked if it’s a good idea to hold over the weekend. And we’ve been asked if it’s ok to just skip our Friday entries (spoiler alert: “no!”)
1. To answer the first question: why do a good portion of our trades land on fridays?
The US markets are open 5 days a week. The futures open at 6 PM EST on Sunday and close at 5 PM EST on Friday… leaving a 49 hour gap in data. From our program’s perspective, that gap needs to be filled by something. It is simply impossible to have a black hole of data while time continues to march on.
--> From a mathematical perspective, this makes perfect sense. Fractals are infinitely repeating structures without gaps or blackholes or disjointed data by any other description. But markets have gaps in Time and from a trading perspective, this leads to a problem.
--> From a trading perspective, this means an adjustment needs to be made. The adjustment we have always made is to move all weekend, holiday or overnight (out of session) pattern changes to the last available day and time when trading is possible. Most often this has been Friday. Quite simply, if our programs say we need to switch a position on Saturday or Sunday, we simply trade it on Friday at the same time of day. By default, this means Friday consumes roughly 3/7ths of all trades we have ever placed (42.857%).
2. But is friday a good trading day?
There are 5 trading days in a week. Ignoring the fact that some holidays remove many of the trading days on Monday or Friday, this means roughly 20% of our results should occur on each day. As it turns out, Friday has accounted for more than 40% of our net profit over the last 15 years (41.003% to be exact). So yes it is a good trading day.
Finally, anticipating “bad things may happen on the weekend” comes from fear. Fear comes from the unknown and the unknown comes from taking too much risk. So in short, “don’t trade on Friday” is said by people who are taking far too much risk. They are afraid of what will happen while not looking at the screen.
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