When Larry Williams traded the S&P 500 futures in the 1987 championship, he used what he described as a “dumb setup.” It wasn’t the actual trading setup that made money, it was his use of a highly risky “Optimal F” money management strategy developed by risk manager Ralph Vince.

We won’t get into the details of his system, but a “setup” can easily be imagined by filling in the simple equation: If X happens, then go long or short, and close position at the end of the day.

Here is one example of a strategy that any trader could have dreamt up (this is not a recommendation but a demonstration).

If the market is trending down at the end of the day:

  • Open a short position and place a stop loss above the highest high in the day’s session.
  • If there is a blowout day in your favor, don’t initiate a position after the market closes.
  • Close the position at the end of tomorrow’s trading day and repeat the process.

Here’s what that might have looked like on the YM from June 11 – 22, 2021.

YM End of Day Strategy

Here’s another example of a somewhat “dumb setup” that might or might not have relevance:

  • When the market has three up closes, go short the following day and close your position at the end of the day.
  • When the market has three consecutive down days, go long the following day.

Here’s what that might have looked like in the ES from May 5 to June 15, 2021.

ES End of Day Strategy

And here’s another EOD system to use as an example (or something to build on and refine):

  • When an instrument is trading above its 50-day simple moving average, go long on tomorrow’s session every time today’s session trades below yesterday’s low.
  • Place a stop loss a fractional distance below the trigger session’s low.
  • Close your position at the end of tomorrow’s session.

Here’s what that might have looked like for the NQ from December 18, 2020 to February 9, 2021.

NQ EOD Strategy

If you’re looking to trade, or even day trade, based on end of day data, hopefully, your trading rules will be a bit more sophisticated and calculated than the ones in the examples above.

There are many ways to develop systems based on end of day data–from news trading to simple trend following (as in a few of the examples above) to candlesticks and much more.

But this is where we’ll stop, allowing you to develop your own coherent trading strategy.

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