Overnight Gaps in DAX

The DAX futures market is only open from 8:00 until 22:00 (Frankfurt time) which means we generally see gaps in the market when it reopens in the morning. This exposes traders holding positions overnight to additional risk. 

In theory one might expect this risk to be rewarded with a risk premium, but as we'll see that is not the case.

Quantifying trend days

In my first blog post I want to show you a way to mathematically define trend days. Trend days are easy to spot (in hindsight) with the naked eye but you probably don't want to weed through 10 years of intraday data manually. Defining a simple "trendiness" measurement can help answering a lot of questions programmatically:

  • Is there a typical behaviour before or after a trend day?
  • Are trend days distributed evenly among the weekdays?
  • Do trend days cluster or are they evenly distributed over time?
  • How trendy is a market?
  • Etc.

Have a look at last Wednesday's DAX chart: