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Research Reveals It's Possible to Trade Successfully & Money Can Be Made Based on Price Moves which Occur Just Before the Daily Close
Welcome to The Knowledge is Power Traders Resource Guide, providing free information to get you on the road to trader success today by providing commodity futures trading information to help traders trade and day trade the financial markets profitably!
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.
For those of you who actively trade (or desire to learn how to trade) the financial and futures markets, there are a lot of other things outside the markets you should be following. But, I guess my bigger message is for those of you that aren’t in the futures markets, whether you trade them or not, the futures markets have a significant impact on what happens in the other financial markets, including forex, currencies, options and stocks. That’s why you should soak up every piece of good trading knowledge like a sponge in a quest to clearly see the bigger picture.
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 and 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 market 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 will 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 trading observations and trading concepts.