Study: Buy BAJAJFINSV when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy BAJAJFINSV when there is bullish divergence in RSI" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: buy BAJAJFINSV at the closing price whenever the signal triggers (Rs. 2Lac per trade). Then cover the position "X" trading days later at close_price i.e. sell after "X" trading days. Here are the results of this study:

X DaysNet ProfitTotal TradesWinning TradesLosing Trades% ProfitableAvg Winning TradeMax Winning TradeAvg Losing TradeMax Losing TradeWin/Loss RatioProfit FactorSharpe RatioAvg Trade
110894.3685362.55499.219994.74-5533.89-7978.480.991.660.071361.79
213919.79844508443.4820515.52-4963.53-8255.191.71.70.061739.97
326118.885362.512192.9830089.43-11615.37-18516.131.051.750.073264.85
420048.1685362.513512.1326617.57-15837.49-36645.160.851.420.0412506.02
5-15514.88445016475.6728933.39-20354.37-52967.740.810.81-0.024-1939.35
61770.888445020369.5229832.45-19926.8-48258.061.021.020.0027221.36
7-40128.238445017748.723865.96-27780.75-53032.260.640.64-0.056-5016.03
8-75664.238445011922.2418123.54-30838.29-49730.150.390.39-0.11-9458.03
9-104988844509280.1722093.63-35527.18-74428.170.260.26-0.13-13123.51
10-11908783537.514668.0133245.66-32618.19-99537.390.450.27-0.12-14885.86

From the table above, we see that best results are achieved by holding positions for 3 trading days. Profit factor is 1.75. Number of signals (total trades) generated is low, don't trade solely on the basis of this study. Strategy is showing mildly bullish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 62.5%, which is good. Average return per trade is 1.63%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.07, which is low, don't trade solely on the basis of this study.

Strategy Analysis - Exit Criteria

In the study above, exit criterion was that hold the position for "X" trading days. That's one possible exit criterion. However, we can have more elaborate exit criteria. Now we study this strategy under other exit criteria. There are 3 things which you must get to know before proceeding further. Table below shows the performance of this strategy under various exit combinations. Note that nil,nil,-1 is a special exit combination where we just take the best result of "X" Analysis study above.

Stop LossAdjust Stop LossTargetAvg Holding PeriodNet ProfitTotal TradesWinning TradesLosing Trades% ProfitableAvg Winning TradeMax Winning TradeAvg Losing TradeMax Losing TradeWin/Loss RatioProfit FactorSharpe RatioAvg Trade
nilnil-1326118.885362.512192.9830089.43-11615.37-18516.131.051.750.073264.85
atrtrail25.36-58231.47114736.3611724.819169.04-15018.67-38162.350.780.45-0.097-5293.77
atrnil27-84142.1610282029903.7640638.47-17993.71-38162.351.660.42-0.11-8414.22
atrnil37.7-92576.4910191060957.760957.7-17059.35-38162.353.570.4-0.11-9257.65
atrtrail35.45-68132.69114736.369249.4914390.14-15018.67-38162.350.620.35-0.12-6193.88
atrtrail-15.45-68132.69114736.369249.4914390.14-15018.67-38162.350.620.35-0.12-6193.88

In the table above, row 1 shows the best exit criterion. Profit factor is 1.75. Number of signals (total trades) generated is low, don't trade solely on the basis of this study. Strategy is showing mildly bullish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 62.5%, which is good. Average return per trade is 1.63%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.07, which is low, don't trade solely on the basis of this study.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
BAJAJFINSV Performance, X=3, Profit Factor:1.75

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2013110 Jun 2013 (-5.0%)
2011201 Dec 2011 (3.41%), 19 Dec 2011 (2.27%)
2009124 Aug 2009 (5.06%)
2008424 Sep 2008 (-3.16%), 20 Oct 2008 (-9.26%), 04 Nov 2008 (4.7%), 04 Dec 2008 (15.04%)



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