Unlocking the Power of Trading Days: Analyzing S&P 500, Gold, and Treasuries

We are strong believers in seasonal trading strategies, and one of the best seasonalities is specific trading days of the month. Most articles about seasonal trading refer to calendar days, but a much more accurate trading term is the trading day. The calendar and trading days can be completely different. So, what is the best trading day of the month? We test the performance of each trading day in the S&P 500, the gold price, and long-term Treasuries.

In the stock market, the best trading days of the month are the last and first of a new month. The gold price seems to have a rather erratic distribution pattern, while long-term Treasuries have a strong end-of-month effect.

First, let’s look at calendar days vs trading days:

Calendar day vs trading day

The calendar day is rarely the trading day. Let’s take an example:

The 1st of January 2022 is a Saturday, while the first trading day of the new month and year is on the 3rd of January. If you want to backtest the performance of the first trading day of the month you can’t use calendar days.

There are never more than 23 trading days in a month, while the number of calendar days is between 28 and 31. This means you can’t backtest the last trading day of the month by using calendar days, either.

As the month goes on, the difference between calendar and trading day increases.

This might seem pretty self-evident, but nevertheless, we want to make sure the reader understands the differences.

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How to calculate the trading day

All trading platforms have a function that easily determines the calendar day. For example, in Amibroker you simply write day()==31 if you want to buy or sell on the 31st of any month. It’s straightforward and easy. Likewise, determining the first and last trading day of the month is also pretty straightforward.

Unfortunately, no software (to our knowledge) calculates the trading day easily. To find the trading day, you need to write a script or refer to a calendar. We use the latter, described in our Amibroker course in lesson 38. It’s not the scope of this article to provide you with this.

Our backtests of the trading days of the month

Below we backtest each trading day in three ETFs: SPY, GLD, and TLT.

We invest 100 000 in trading day N at the inception of the ETF and let the amount compound until today. However, we are mostly interested in the percentage gain per trading day.

Each trading day measures the performance from close of the day before until today’s close. We use Amibroker’s optimize function.