The strategy trades Chinese commodity futures based on first 30-minute returns, using high-volume contracts. It achieves a 50.75%-53.25% win rate, emphasizing volume-driven contract selection and modest profitability.
ASSET CLASS: futures | REGION: China | FREQUENCY: Intraday | MARKET:
Commodity | KEYWORD: Time-series, Momentum, China
I. STRATEGY IN A NUTSHELL
This strategy trades Chinese copper, steel rebar, soybean, and soybean meal futures based on the first 30 minutes of trading. If the opening 30-minute return is positive, the strategy goes long; if negative, it goes short. Contracts are rolled using the most liquid (highest volume) futures, avoiding reuse of earlier maturities. Average win rates range from 50.75% to 53.25% depending on the commodity, highlighting modest profitability and the importance of liquidity in contract selection.
II. ECONOMIC RATIONALE
The strategy exploits intraday liquidity dynamics. Day traders provide liquidity by taking offsetting positions to initial trades at market open, reflecting overnight information. They later unwind these positions to reduce risk, causing price reversals. Opening returns predict the rest-of-day returns because informed traders’ early moves trigger subsequent adjustments by liquidity providers. While regression slopes for predicting rest-of-day returns are larger, t-statistics are lower, yet the effect remains economically meaningful, supporting the strategy’s focus on the first 30-minute return as a predictor.
III. SOURCE PAPER
Intraday Time-series Momentum: Evidence from China [Click to Open PDF]
Muzhao Jin, Fearghal Kearney, Youwei Li, Yung Chiang Yang, Queen’s University Management School; Queen’s University Belfast – Queen’s Management School; Hull University Business School; University of Liverpool – Management School (ULMS)
<Abstract>
This study conducts an investigation of intraday time-series momentum across four Chinese commodity futures contracts: copper, steel, soybean, and soybean meal. Our results indicate that the first half-hour return positively predicts the last half-hour return across all four futures. Furthermore, in metals markets, we find that first trading sessions with high volume or volatility are associated with the strongest intraday time-series momentum dynamics. Based on this, we propose an intraday momentum informed trading strategy that earns a return in excess of standard always long and buy-and-hold benchmarks.
IV. BACKTEST PERFORMANCE
| Annualised Return | 11.92% |
| Volatility | N/A |
| Beta | N/A |
| Sharpe Ratio | N/A |
| Sortino Ratio | N/A |
| Maximum Drawdown | N/A |
| Win Rate | N/A |
