Over the course of our history, we've retired four day-trading tests.  We believe the results are insightful.  You can view the details of these tests here.

6/6/2005:  Our most recent test is this:   we buy the 4% of stocks with the biggest losses in the afterhours (from the last close to the current open), and we sell short the 4% of stocks with the biggest gains in the afterhours.  Both positions are closed at market close.  The test is mechanical...we open our current data file, subtract the "open-yclose" column from the "gain1" column to get the gain from open to close (as opposed to close to close, which is what the "gain1" column measures), sort the data according to "open-yclose", and measure the gains/losses in our new column.

In case you're confused about the above paragraph, look at the little table below.

Here, you can see that the gain from open to close (purple) can be gotten by subtracting the figure in the green cell from the figure in the orange cell.  If "gain1" = 3, and "open-yclose" =1, then the figure in our new column is 2.  This tinkering is currently necessary because we don't have an "open to close" column in our data file...an omission we'll remedy in the near future.

Should the test prove successful (in the sense that it points the way to real world gains), you might want to know where you can find a list of stocks that have gained or lost in the current after-market/pre-market session.  Here's our favorite link for that purpose.

In the table below, the "general market" is measured from open to close, just like the "long gains" and "short gains". 

On June 20, we added a column whereby we identify several of the afterhours losers/winners that reversed in a big way in the regular session, in an attempt to discern what forces are pushing and pulling these stocks. 

On Oct 10, we ceased the test initiated on June 20, and began a new one:  we sort our data according to the close-open differential to find stocks with large afterhours gains and losses.  In the case of large losses, we find the first stock that meets the following requirements:

1)  The afterhours loss/gain must be 5% or less (we're not interested in situations with radical gains or losses)

2)  The price of the stock must be above $15.00.  We want to exclude cheap stocks that have large bid/ask spreads.

3)  Looking at the chart of the stock, there cannot have been a large "pop" or "drop" at the open.

The idea above is simply to earnestly test whether the strategy of day-trading stocks with large afterhours losses (or gains in the case of shorts) can actually be profitable.

*It appears that an excess of opening values were unrealistically low on this day...most of the stocks with large afterhours losses rebounded very quickly, if not spontaneously, on the open.  There were 13 stocks that opened just about precisely 15% below the previous day's close (wdfc, slgn, wstc, ptsi, natr, thor, mrln, saft, vitl, surw, supx, shoo, ntrt)...very strange.  We'll have to keep our eye out for this sort of behavior...obviously, the value of this test diminishes if opening values don't have much relevance to the price you have to pay to acquire a stock just after the market opens.

**More suspect data.

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