What's going on everyone, i'm matt, and i'm back at it again with another seasonal trade for the month of july. This particular trade applies to the overall market, the s p 500.. In this video, i will be covering the exact details of the trade, its historical performance and, at the end, i will be discussing one potential improvement. I would truly appreciate it if you could hit the like button.

Leave a comment subscribe to the channel. All the engagement helps with getting youtube to promote this video to other people. Don't forget to turn on your notifications. I post these seasonal trade videos before they take place which allows you to track them in real time.

None of that hindsight trading baloney before i dive into the good stuff. Don't forget: i'm not a financial advisor everything in this video and really all of my videos is for educational purposes, only don't be a silly goose and blindly copy my traits. Please do your own research, alright, let's get started whenever i try to create a seasonal trading strategy. I like to start with the bigger picture in this case.

That means taking a look at how the overall market has performed in previous julys to get the numbers. I was after i simulated what would have happened if i bought into the market on the first day of july and then closed the position on the last day of july. I applied this simulation to the past 20 years at first, the 65 accuracy and the profit factor of 2.23 might make you think that july clearly favors the bulls, but the equity curve, for this simulation tells a different story in the early 2000s. The month of july was a mixture of chop and bearish moves then, just before 2010 a bullish pattern started to form.

After taking all that into account, i would agree that july is bullish, but it's definitely not the strongest pattern. I've ever seen, because i want the best odds when i trade, i looked for the best individual day to buy into the market in the month of july. To pull this off, i use a concept known as trading day of the month. Tdom is described in detail in the video on the top of the screen now, but as a quick summary, it allows you to compare trading days within a month to their counterpart in previous years.

The tdom value is simply calculated by counting how many days the market has been open within the current month. Great you now have all the foundation. You need to understand this seasonal long strategy. I personally run this strategy on the s p, 500 futures market, but i will also show you how it has performed on the more popular spy etf.

But first let me go over the specifics of this trading strategy. This seasonal trade has one entry rule and two exit rules. The entry trigger is as simple as it gets. If today is the seventh trading day of july, you would go long as in buy into the market the next time it opens for the year 2020.

The seventh trading day of july is the 10th. If you're trading futures, you would buy es when the globex market opens on the evening of the 12th. If you trade etfs, you would buy spy when the market opens on the morning of july 13th. After you have established your position, it would be closed in one of two ways.

Whichever comes first, the first possible exit is a profitable close. If the daily closing price is above your entry price, you would exit at the next market open. The second possible exit. Is your stop loss? This particular stop.

Loss is based on the average range over the past 20 daily bars. If the market falls by more than 2.5 times this value from your entry price, you would take the l and close the position. That's the entire strategy. You would buy into the market on the eighth trading day of july, then you would exit after the first profitable close or when your stop loss is hit.

Honestly, i have no clue how this trade will do this year. Anyone who tells you they definitively know where the market's going either works for the fed or is a liar beyond reading tea leaves. The best i can offer is showing you how the strategy has performed historically on the screen. Now are the historic performance results for this seasonal trading strategy, but before we dive into that, let's take a look at its most recent trade in the year 2019..

As we know, this particular trading strategy goes long on the eighth trading day of july. Let's just double check that really quick one, two, three, four, five, six, here's the seventh day that would be the trigger and then we would go long at the next open. It looks like it bought into the market at 2978.75 and then because the close was over. That actually triggered our exit, which means that it got out at the open on the next day, and that was at 2985.75.

This was a difference of exactly seven because we were trading on the futures market. A gain of seven points is actually a profit of three hundred fifty dollars. So we know the most recent trade of this strategy was profitable, but let's take a look at how it's performed over the past 20 years, there's a total of 20 trades because there's one trade per year and this back testing started in the year 2000.. 18 of those trades were winners and two were losers, which means the accuracy was 90 percent, the gross profit was 11 000 and the gross loss was a hundred and twelve dollars.

This means that the profit factor was 101., in other words, the gross profit was 100 times larger than the gross loss. Even though this strategy doesn't have a max hold time exit, the average bars in a winning trade was 2.5 days and the average bars in a losing trade was two days. I just wanted to point that out, so you know that you won't be stuck in this trade for a long time. These are the back testing results for this seasonal trading strategy on the s p, 500 futures contract.

Let's take a look at how it does on highly correlated markets. Here are the results for the exact same strategy being applied to the dow futures contract out of 18 trades 15 were winners, three were losers, so the accuracy was 83 percent. The gross profit was 9.5 000 and the gross loss was just under 5 000.. This means the profit factor was 1.99.

Now, let's take a look at how this strategy performs on the nasdaq futures contract out of 20 trades 19 were winners, one was a loser, so the accuracy was 95, the gross profit was 13 000 and the gross loss was just over one thousand dollars. This means that the profit factor was just under 11.. The strategy didn't perform as well on the nasdaq or on the dow, as it did on the s p 500. But i want to remind you, i didn't change any aspect of the strategy.

The fact that the strategy had a high winning percentage and a considerable profit factor on all three contracts tells me that this seasonal bullish pattern is robust. Now that we've applied it to three different future contracts, let's see how it performs on the spy etf. Last but not least, here are the results for the strategy when applied to spy out of 20 trades 18 were winners, two were losers, so the accuracy was 90. The gross profit was 2 000 and the gross loss was just under 600, which means that the profit factor was 3.57.

As expected, the overall result was positive, which further highlights the strength of this seasonal trading strategy. Before i explain one potential improvement for this seasonal trading strategy, i wanted to be clear that i'm not an expert systematic trader, i'm just an average joe trader who shares what he finds. If you have a better suggestion, let me know i'm more than happy to incorporate new ideas. As i was back testing this strategy.

I noticed something interesting when i used a different exit, dfpo delayed, first profitable opening. This means you wouldn't exit after the first profitable close. Rather, you would let the market play out for one full day after the first profitable, close and then exit the position. The results for this small alteration are on the screen.

Now, as you can see, the profit factor does take a hit, but both the net profit and the accuracy increase to me. It appears that the new strategy is attempting to take advantage of positive momentum, but it does come at a higher risk. I will personally be exiting this trade after the first profitable close. I won't be using dfpo, but i do think it's worthwhile to examine both variations.

Who knows, it might be a positive change to one of your current strategies, depending on when you're watching this. I hope you can watch the trade play out in real time if you have any questions or want the code for this strategy reach out to me on twitter. If you enjoyed the video hit the like button and leave a comment, don't forget to subscribe and turn on your notifications, thanks for watching and best of luck in the markets.