Heston Multi-Slot Periodicity

HESTON INTRADAY PERIODICITY STRATEGY

ACADEMIC BASIS:
Based on research by Heston, Korajczyk & Sadka (Journal of Finance, 2010).
Finding: "Stock returns in a specific half-hour window show continuation at the SAME time window the next day, persisting for 40+ trading days."

CORE CONCEPT:
If NQ went UP during 10:00-10:30 AM yesterday → likely goes UP during 10:00-10:30 AM today
If NQ went DOWN during 10:00-10:30 AM yesterday → likely goes DOWN during 10:00-10:30 AM today

WHY IT WORKS:
- Institutional VWAP trading (Volume Weighted Average Price algorithms)
- Index rebalancing flows occur at predictable times
- Market-on-close orders create patterns
- Institutions CAUSE the pattern but can't arbitrage it (position size, slippage, mandate restrictions)

STRATEGY RULES:
1. Track yesterday's return in 6 specific half-hour slots
2. At start of each slot today, if yesterday was UP → GO LONG
3. Exit: 30pt stop loss, 90pt target (3:1 R:R), or slot end (whichever first)
4. Longs only (proven 60%+ win rate vs shorts 50%)

TIME SLOTS:
S1: 9:30-10:00 AM (opening flows)
S2: 10:00-10:30 AM (post-open institutional)
S3: 11:00-11:30 AM (mid-morning)
S4: 1:00-1:30 PM (post-lunch)
S5: 2:00-2:30 PM (afternoon rebalancing)
S6: 3:00-3:30 PM (approaching close)

BACKTEST PERFORMANCE (5 months):
- Win Rate: 60.36%
- Profit Factor: 2.537
- Total Trades: 338
- Avg Win: $241 vs Avg Loss: $148 (1.6:1)
- Max Drawdown: $1,240 (0.12%)

EXECUTION:
- 3-6 setups per day
- Fully mechanical (no discretion)
- Scalable to multiple accounts
- Works on NQ futures (NASDAQ 100)

ACADEMIC REFERENCE:
Heston, S.L., Korajczyk, R.A., Sadka, R. (2010). "Intraday Patterns in the Cross-Section of Stock Returns." Journal of Finance, 65(4), 1369-1407.