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Do prices tend to move consistently in one direction from open to close, given the previous day's price pattern, and do these patterns of intraday bias lend themselves to profitable trading systems? To answer these questions, I have tested all possible two-, three-, four- and five-day open-to-close patterns for the T-bond futures market from 1978 to 1987. My intention is to provide objective statistical data that can be used as a reference in trading.

The price patterns in Figure 1 are referred to as "systems" because the custom software I used is system-oriented. The "+" sign in the "Pattern" column indicates an up close relative to the previous day's close; the "-" sign represents a down close. The exception is the last "+" or "-" sign in the sequence which represents the opening of that day and the point of entry for the trade.

The "% Profits" column in Figure 1 determines whether intraday bias exists, and the "Total Profit" column, calculated before commission and slippage, describes whether this system is profitable on the buy or sell side. Each trade entry is on the open (shown as the last "+" or "-" sign in the pattern) and trade exit is on the close. No stops were used in the tests.

I conclude that useful biases do exist from open to close as evidenced by many patterns producing 60% or better results.

Patterns

To explain the relationship of chart and system patterns, refer to System 5 in Figure 1 and the first bar chart pattern in Figure 2. The bar chart pattern is two lower closes with a lower open. This is represented by three minus signs (---) in System 5's "Pattern" column.

I have observed that the best profits in this pattern come mainly in strong uptrends. In trading ranges it is not as profitable.

In Figure 2, beginning from left and working to right, the first pattern shows a daily price bar with the closing price marked. Immediately to the right of this daily bar is the next day's close (lower), which is the first minus sign in System 5. The next dash also is a lower close than the previous day and is the second minus sign in System 5. The last minus sign in the (---) pattern is the X which represents the open on the day of the trade.

In summary, you have a lower close relative to the previous day followed by another lower close, followed by a lower open. In this case, a long position was taken on the open of the third day and exited on the close of the third day.

To further explain how to interpret the data, Figure 3 lists the dates of entry on all possible buys after two lower closings and a lower open (System 5) and all sales after two higher closings and a higher open (System 12). On the chart, itself, a dash on the left of each daily bar shows the open (entry). The dash on the right of the bar is the close (exit). This Eurodollar chart is used in place of T-bonds to display an actual day session open because the chart service I use shows T-bond night session opens on the daily bar chart and this study should be used in conjunction with day session opens only.