So am I understanding this correctly that massive algorithms are shorting stocks first thing in the morning - like in the first few seconds of trading - and then consolidating their positions before close. They basically can do this regularly essentially guaranteeing returns that the rest of us aren't able to take advantage of. And the SEC's lack of enforcement has allowed this practice to continue for the past decade or more. Is this the "strategy"?
They say that stocks go down during the day and up at night
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Re: They say that stocks go down during the day and up at night
#12Earlier quoted context omitted.
Simply put, day means if you bought on the market open and sold at the close. Night means if you bought on the close and sold on the open. The implication seems to be stocks jump at the open then trail off during the day. Thing is most of this is only obvious in retrospect and by the time you realize it the opportunity is gone because it’s now widely known.
As someone who doesn't know much about stocks and trading - is it normal to keep stocks for only evening or evening -> morning, what about morning -> morning, or even longer timespans? Or is this the difference between trading and investing?
You can keep stocks only for milliseconds if you wish... (see e.g. https://en.wikipedia.org/wiki/High-frequency_trading). And for the less extreme version there's day trading (https://en.wikipedia.org/wiki/Day_trading) where you sell all your positions before the market closes (basically you try to speculate on intra-day changes of the stocks, so you keep them from minutes to hours).
> Or is this the difference between trading and investing?
Probably, or rather between purely speculating and investing?
Re: They say that stocks go down during the day and up at night
#13This has to be too simple to be the reason, but I immediately thought it's because exchange opening hours are less than the closed hours each day, and since stocks generally go up, more of the increase should happen at night on average.
Re: They say that stocks go down during the day and up at night
#14Earlier quoted context omitted.
Simply put, day means if you bought on the market open and sold at the close. Night means if you bought on the close and sold on the open. The implication seems to be stocks jump at the open then trail off during the day. Thing is most of this is only obvious in retrospect and by the time you realize it the opportunity is gone because it’s now widely known.
As someone who doesn't know much about stocks and trading - is it normal to keep stocks for only evening or evening -> morning, what about morning -> morning, or even longer timespans? Or is this the difference between trading and investing?
No, it’s definitely not normal although I don’t have figures on what the average hold time is for any given issue. Since a lot of stock is purchased as automatic 401k contributions a lot of stock is held for many years. I believe this article is just using this to illustrate an unusual price pattern that emerged for some time where stocks opened higher than the close for a significant number of days over this timeframe.
Re: They say that stocks go down during the day and up at night
#15YOu're graphing a random walk with a single black swan event (2008 crash).
A more honest graph would just have the day/night delta mapped out, not integrated in.
Re: They say that stocks go down during the day and up at night
#16Since the article is not very informative, and it's a real rabbit hole to try to track this stuff down across all the linked articles etc. and as I don't even really care about stocks and the market, I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?
Intraday means you buy some stock - in some exchange - in the morning at the open price in the opening auction and sell the stock in the evening at the close price in the closing auction. Overnight means you take the other side: buy at the close and sell at the open. (This is a bit more complex conceptually as you would never settle the trades and that may be problematic regarding dividends and other corporate action…
Could you please explain this complexity? ELI5 even?
You never settle the trades? Dividends etc?
Hmm maybe I am 5...
Edit: ok yep so I guess what if they repeated the analysis leaving some time around open/close for chance of trades to settle, would the effect disappear or would this chance beef the key factor for the reported gain?
Re: They say that stocks go down during the day and up at night
#17Since the article is not very informative, and it's a real rabbit hole to try to track this stuff down across all the linked articles etc. and as I don't even really care about stocks and the market, I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?
While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Re: They say that stocks go down during the day and up at night
#18Since the article is not very informative, and it's a real rabbit hole to try to track this stuff down across all the linked articles etc. and as I don't even really care about stocks and the market, I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Probably due to labor unions.
Re: They say that stocks go down during the day and up at night
#19There's a few (often contradictory) explanations for this.
My favourite is: Things that can be sold quickly are safer (because you can sell them if bad news comes out) so are worth less than less liquid things, like holding stocks when the market is closed. So by holding stocks overnight you are being payed for taking on the risk by those selling them before closing.
Re: They say that stocks go down during the day and up at night
#20Good luck replicating this in sample. Open and closing auctions are going to crush your strategy from a cost and slippage perspective. In addition you should be looking at risk adjusted return. The overnight volatility is way higher than the intraday. Are you being paid for each unit of risk you're taking?