Is swing trading futures profitable?

A long-biased swing strategy on an index contract will usually show a profit in a rising market, because it holds the market's drift. Whether it has an edge is a different question, answered only by comparing it with random entries of the same count and holding period.

Does momentum work on daily futures bars?

Not on the research record. Daily return autocorrelation at lags one to ten is indistinguishable from zero on every major contract tested, and most of the index drift a long momentum system appears to capture accrues overnight whatever the signal says.

How many trades does a swing strategy need before it can be judged?

Usually more than one market provides. The uncertainty in an average trade shrinks with the square root of the number of trades, so a strategy that trades twenty-five times a year needs many years, or many markets, before a modest edge stands out from noise.

Can the screener test multi-day strategies?

Yes: on day or week bars, or on intraday bars held overnight, entered at the next open or at the close and ended by its stop, its target, a trailing stop, a time limit or a condition, with weekends held or not. A position held overnight or over a weekend can open well beyond its stop. The screen fills that stop at the opening price, and a real order can fill worse, so a loss can be larger than the stop you set.

Strategy style

Swing trading futures: what the evidence says

A swing strategy holds a position for a few days to a few weeks, trades far less often than an intraday system, and carries risk overnight and over weekends. Its hardest test is not the market's noise but the market's drift: a long position held for days earns what the market earns, edge or no edge.

The benchmark a swing strategy has to beat

About three quarters of the index contracts' long-run drift accrues overnight, between one session's close and the next open. A long-biased swing system collects that drift simply by being in the market, and a backtest with no benchmark reports it as strategy performance.

The honest comparison is a drift null: the same number of trades and the same holding period, entered at random. Momentum, the most common swing premise, has little to beat it with. On daily bars, return autocorrelation at lags one to ten is indistinguishable from zero on every major contract tested.

Too few trades to measure

Swing strategies trade rarely. One position at a time on one market, held about two weeks, cannot produce much more than twenty-five trades a year, and the smallest edge a sample can tell apart from zero shrinks only with the square root of the number of trades. Several years of history can still hold too few trades to resolve an ordinary edge, so the honest verdict on a single-market swing idea is often inconclusive rather than dead.

Overnight and weekend gaps

Futures trade nearly around the clock, but not over the weekend or through the daily halt. A move that happens while the market is closed fills a stop at the reopening price, not at the stop, so a multi-day position has to be sized for the gap as well as for the stop distance.

Testing a swing idea

The screener tests multi-day ideas on day or week bars, or on intraday bars held overnight: entered at the next open or at the close, decided a minute before it, and ended by its stop, its target, a trailing stop, a time limit or a condition, with weekends held or not as you choose. A position held overnight or over a weekend can open well beyond its stop. The screen fills that stop at the opening price, and a real order can fill worse, so a loss can be larger than the stop you set.

From the research record

Swing trading questions

Is swing trading futures profitable?: A long-biased swing strategy on an index contract will usually show a profit in a rising market, because it holds the market's drift. Whether it has an edge is a different question, answered only by comparing it with random entries of the same count and holding period.
Does momentum work on daily futures bars?: Not on the research record. Daily return autocorrelation at lags one to ten is indistinguishable from zero on every major contract tested, and most of the index drift a long momentum system appears to capture accrues overnight whatever the signal says.
How many trades does a swing strategy need before it can be judged?: Usually more than one market provides. The uncertainty in an average trade shrinks with the square root of the number of trades, so a strategy that trades twenty-five times a year needs many years, or many markets, before a modest edge stands out from noise.
Can the screener test multi-day strategies?: Yes: on day or week bars, or on intraday bars held overnight, entered at the next open or at the close and ended by its stop, its target, a trailing stop, a time limit or a condition, with weekends held or not. A position held overnight or over a weekend can open well beyond its stop. The screen fills that stop at the opening price, and a real order can fill worse, so a loss can be larger than the stop you set.

Screen a swing idea

Describe it in a sentence. The desk turns it into an exact specification and screens it through seven gates written down before the run, from real per-fill costs to a drift null and an era split. The verdict usually comes back in 15 to 25 seconds.

Screen an ideaThe first is free.