Can You Trade Successfully & Money Be Made Based on
Price Moves which Happen Just Prior To The Close?
Our commodity futures trading system research was done using data from the Chicago Mercantile Exchange (CME) Live Cattle market over a 4-1/2 month period. The trade results probably would be similar using
data from most other futures markets but we have not verified that to be correct.
Using our commodity Price Quotes Machine we made a note of the price exactly 30-minutes prior to the market close each trading day. On the next day we noted the opening
price, the days high/low range above or below the open, and closing price. Days
were ignored if the 30-minute price and the subsequent closing prices were the same.
During the testing time-period a total of 61 trading days had chart up-trends during the last 30-minutes, and 78-days had market down-trend during the last 30-minutes.
Next Days Close Higher 62% of Time
Next Days Close Lower 56% of Time
The results were bullish for the next day if the price trend
was up during the last 30-minutes, a total of 38 out of 61 times, or 62% of the
time.
If the last 30-minute trend was down, the next day was
likely to be bearish 44 out of 78 times, or 56% of the time.
This test has some good statistical validity. It seems to
us a good commodities futures trading system could easily be developed based on this technical research.
Unfortunately, the percentage numbers may not be quite
strong enough to make any potential commodity futures trading systems too reliable or extremely profitable. However, with more extensive market research involving a number of diversified trading markets, and
using good money management skills combined with a tested and sound trading plan, any potential trading system based on this research could in fact be nicely profitable with reasonable low-risk.
Additional research needs to be done on this subject to decide on the reliability of any potential
commodity trading system or trade methodology based on this concept.
Can Money Be Made Based on the
Difference Between Closing and Settlement Prices?
Did you now that the official commodity exchange settlement price and the actual closing price are frequently different and quite often are changed some time after the actual trading ceases?
Some of our CTCN Traders Club Members may not be aware of that fact. However, if you have a quote machine I am sure you have noticed this regular occurrence.
The market stops trading and perhaps Soybeans last tick at
exactly 679. Usually, about 10 to 20-minutes or so AFTER all trading stops, the
Exchange gives the day's so called settlement price, of say 678-1/2.
The Official Closing Price is Not Necessarily
Based on The Last Actual Trade That Took Place
Thus, even though the last actual trade was at 679, the
official closing price will be 678-1/2 that will be published in newspapers and
market data vendors.
Another example is T-Bonds last trading at say 113-04, but
about 15-minutes AFTER trading stops the Exchange reports they settled at
113-03.
Why does that occur? The exact reason is somewhat unclear.
However, it seems to be related to the fact the Floor Traders amd Floor Brokers do a commodity settlement
between themselves after the actual close of public trading.
It's Possible To Make Money Trading
Based Only On Close/Settlement Phenomenon
Is there any way money could be made based on this common
settlement procedure? Quite possibly! We tested this concept in the Live Cattle
futures market and discovered the following:
A total of 30 closes were observed where the final
settlement price was higher than the last tick actual trade price. On 22 days
the next day's closing price was bullish, or 73% of the time!
A total of 28 closes took place that resulted in the days
final settlement being lower than the day's last tick. On 21 days the next
day's close was lower, or 75% of the time!
Our technical market analysis is not complete. Additional markets and
a greater time period need to be analyzed and additional futures markets need to be researched.
However, there's a reasonable chance consistent money could be made trading by using these commodity observations and trading concepts.