Never Sell Oil on Fridays? (by Moneymiser21)

By -

A well respected Slope trader posted more than once that he never/rarely sells oil futures (/cl) on a Friday.

So with plenty of backtesting to do on this Good Friday, I put that theory to the test, and found there’s a slight edge to that mindset.

The lookback: 5 calendar year 2012-2017.

314 end of week days (sometimes that was a Thursday)

9:00 a.m. EST until 2:30 p.m. EST (old pit hours still the highest liquidity, with 2:30 p.m. still used for settlement)

The question: Is the close price at 2:30 p.m. higher than the open price at 9:00 a.m.?

The results: 172 of 314 green (54.78%).

So we have a slightly better than a coin flip edge, similar to having any pocket pair versus two overcards in No Limit Texas Hold em.

But there are a couple of additional pearls of wisdom this backtest uncovered.

1. Of the 142 red closes, 36 of those candles had bottom tails make up more than half the length of the candle

2. Of the 142 red closes, 9 of those candles had top tails make up more than half the length of the candle

So let’s assume that intraday traders would be patient and could always identify price trend changing from bearish to bullish and vice-versa. That adds a potential 45 more winning trades (217 total), and brings the percentage up to 69%.

In case you’re curious, adding the year-to-date trades brings us to 326 total with 182 green (55.83%).

No one knows when price will change exactly all of the time, but the weight of the evidence lends support to the theory of “never sell oil on a Friday.”

If anyone has a spare machine learning system, I’m sure there are other edges to be gleaned.