Hi. If I trade stocks based on EOD data and I want to post a trade for the next day, should I wait until the market opens before doing this? I *think* so, because the price could be subject to overnight adjustments (are they always to the downside?) But are there other reasons? Basically it's not always convenient for me to be there with my thinking hat on when markets open, so I need to know it's worth it! Thanks.
Wait until the next day. If the market opens in your favor, you probably won't get a fill. If not in your favor, you will be the sucker who left an overnight order outstanding.
Without testing your hypothesis you won't know. "Thinking" something may or may not happen is a surefire way to go broke. You have to decide if you're going to trade based on EOD data or not, i.e. you need to come up with some rules to guide your decisions. In my experience the only way to come up with these rules is to test out a number of different scenarios and devise a plan. You will have trades go against you and trades that will go your way....there's no way to predict this. You can however come up with a profitable strategy using probability that over time will make you some money. Take a look at hypothetical trades over the last year or so (you can get free historical data from Yahoo Finance), apply your rules and see if you make money or lose money. I use EOD data for some strategies and I place trades the night before. Set it and forget it. These strategies are profitable since I've been trading them (going on 5 years) but like anything there are periods where things go against me for an extended period. Nobody said it was easy. Good luck.
for a particular stock/ETF take a look at pre-market trading/volume/price at say 1-2hrs before open, based on several factors including but not limited to .... overnight news, last EOD price, the major index prices .... I have placed a extended market trade both buy & sell in the window 8am - 8pm EST, looking at the after EOD & pre-market trading price/volume. as mentioned above, placing an order after EOD you could get it right 50/50. as @GaryBtrader posted, try & test of a particular stock/ETF you're looking to trade. good luck with this.
Thanks for the replies. To be fair I have not got around to the testing bit. I need to dig a lot more into the weeds. I have been using ProRealTime so far but can't really see what value the backtest thing has. Looking into QuantConnect now.
I think you should wait until the next day. You won’t get a fill if the market opens in your favor.