Myth Test #4

Buy the dip after 3 red days? We tested 21 years of Nasdaq data

After three down days in a row, buy the next open and sell the close. We tested it on NQ futures since 2017 and on a Nasdaq-100 proxy back to 2005.

Trading Decisions Lab · Updated

Short answer

Partly. On NQ futures since 2017, the day after three red days averaged $356 per contract versus $38 for a random day, with 108 winners and 89 losers. But 2017–2021 lost $6,185, 2022 alone made $41,235 (more than half of all the profit) and 2026 is down $7,420 so far. Over 21 years it is a small tilt, about 54% winners, and statistically borderline.

$356 vs $38avg next day vs random day, per NQ contract
108 / 89winners / losers on NQ since 2017
$41,235made in 2022 alone
54%winners across 476 trades in 21 years

The rule

  • Signal: three red days in a row (each day closes below its open).
  • Buy: the next day at the 9:30 AM open.
  • Sell: the same day at the 4:00 PM close.

The setup appears about once every 10 trading days.

Results

MeasureResult
Average random day, NQ 2017–2026, per contract$38
Average day after 3 red days, NQ 2017–2026$356 (108 winners, 89 losers)
2017–2021−$6,185
2022 alone+$41,235
2026 (to Sep 9)−$7,420
All 21 years, 2005–2026476 trades, about 54% winners

What it means

There is a tilt toward bounces after short losing streaks, but most of the money came from one bear-market year with violent rebounds. Outside 2022 the rule was close to flat, and it is losing in 2026.

Verdict: not a myth, but not a money machine either.

Method and data

  • 2017 – Sep 9, 2026: NQ futures 1-minute data, regular hours, 1 contract, $20 costs per trade.
  • 2005–2016: Oanda NAS100 price data as a Nasdaq-100 proxy (measured in %).
  • Red day = close below open. Trade = next day’s 9:30 open to 4:00 close. Hypothetical results.

Watch the 60-second version

Questions

Does buying the dip after 3 red days work?

Slightly, on average. On NQ futures since 2017 the day after three red days averaged $356 per contract versus $38 for a random day, but most of the profit came from 2022, and 2017–2021 lost money.

How often do 3 red days in a row happen on the Nasdaq?

About once every 10 trading days in our data.

Is buy-the-dip statistically significant?

Borderline. Across 476 trades over 21 years it won about 54% of the time, a small tilt that is not strong evidence on its own.

Keep reading

Cite this: Trading Decisions Lab, “Myth Test #4: Buy the dip after 3 red days” (Oct 24, 2026). https://www.tradingdecisionslab.com/research/buy-the-dip-after-3-red-days

Simulated backtest. Hypothetical or simulated performance results have certain limitations and do not represent actual trading; see the full disclaimer. Past results don’t guarantee future results. Educational only, not financial advice. Futures are leveraged and you can lose more than your deposit.