Study: Buy GSFC when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy GSFC 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 GSFC 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
118988.28251213484101.2312676.06-2325.11-13836.481.761.630.033759.53
219057.52251411567182.8227605.63-7409.27-29769.390.971.230.015762.3
3-14150.16251114449266.9939718.31-8291.93-34968.551.120.88-0.0091-566.01
4-17991.57251114449710.6339718.31-8914.89-44276.731.090.86-0.011-719.66
5-76147.98251213489092.8339718.31-14250.92-72872.120.640.59-0.033-3045.92
6-1161172510154010595.8546478.87-14805-71194.970.720.48-0.049-4644.66
7-89497.182510154011709.9244366.2-13773.09-68427.670.850.57-0.038-3579.89
8-89430.3925817321538358873.24-12499.67-75974.841.230.58-0.034-3577.22
9-78819.55258173215674.3461971.83-12012.6-71865.831.30.61-0.03-3152.78
10-77510.312511144412516.9859154.93-15371.22-72201.260.810.64-0.029-3100.41

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 1.63. 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 48%, which is not acceptable. Avoid this strategy. Average return per trade is 0.38%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.033, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability.

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-1118988.28251213484101.2312676.06-2325.11-13836.481.761.630.033759.53
atrtrail-16.15-27959.474010302520801.91114883-7865.95-20804.62.640.88-0.0069-698.99
atrnil26.76-68937.5437112629.7320516.3944922.9-11331.45-21666.071.810.77-0.025-1863.18
atrnil39.92-90087.163773018.9234004.0167384.35-10937.18-21666.073.110.73-0.026-2434.79
atrtrail25.1-96668.2340112927.512481.5422241.96-8067.76-20804.61.550.59-0.048-2416.71
atrtrail35.47-1107234010302512525.5633362.93-7865.95-20804.61.590.53-0.053-2768.07

In the table above, row 1 shows the best exit criterion. Profit factor is 1.63. 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 48%, which is not acceptable. Avoid this strategy. Average return per trade is 0.38%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.033, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
GSFC Performance, X=1, Profit Factor:1.63

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019204 Feb 2019 (0.27%), 19 Feb 2019 (3.15%)
2018205 Jun 2018 (3.73%), 04 Oct 2018 (-0.53%)
2014104 Feb 2014 (-0.43%)
2013207 Aug 2013 (-1.26%), 23 Aug 2013 (-1.36%)
2012123 Jul 2012 (-0.81%)
2011123 Dec 2011 (0.91%)
2008201 Oct 2008 (-6.92%), 17 Oct 2008 (2.56%)
2003120 Mar 2003 (0.0%)
2002111 Sep 2002 (2.76%)
2001231 Jul 2001 (-1.1%), 14 Aug 2001 (0.0%)
2000316 Aug 2000 (-1.14%), 30 Aug 2000 (0.21%), 09 Oct 2000 (-0.23%)
1998111 Sep 1998 (2.46%)
1997326 Sep 1997 (0.47%), 17 Oct 1997 (-1.2%), 03 Nov 1997 (-0.14%)
1996325 Jul 1996 (1.04%), 27 Aug 1996 (0.72%), 17 Dec 1996 (6.34%)



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