Trading FTSE MIB Morning Reversals with Volatility and Prior-Day Filters

Summary

This strategy description proposes trading a reversal in the Italy 40 index around the morning opening of its futures market. It takes a position opposite the prior day's directional move when that move exceeds a threshold, excludes August, and requires ATR over 50 periods to exceed a stated level. Trades are scheduled to open at 09:00 CET and close at 09:30, with a stop loss and profit target. The author suggests entering slightly after 09:00 because the bid-ask spread may take several seconds to tighten.

The rules also scale position size upward with accumulated strategy profit and reduce it after losses. The author refers to performance images and a walk-forward analysis using constant positions, and reports a favorable long backtest by another person through 2013; the images and supporting test details are absent from the text. The strategy is presented as empirical, and the excerpt does not establish out-of-sample performance, realistic execution costs, or current effectiveness. Its brief holding period makes opening spreads and fill assumptions especially relevant.

Key ideas

• The strategy fades sufficiently large directional moves from the previous day at the morning session open.
• An ATR threshold filters out quieter market conditions, and August is excluded.
• Positions are normally closed after 30 minutes, with a stop and profit target also specified.
• Position size changes according to accumulated strategy profit and loss.
• The cited backtest evidence is incomplete, and execution near the open may affect results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.