Study: Sell HDFC when there is bearish divergence in RSI and ADX is Trending

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In this study, we evaluate the performance of strategy "Sell HDFC when there is bearish divergence in RSI and ADX is Trending" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: sell HDFC 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. buy 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
1-13834.1136746.153307.636199.97-4811.41-10000.550.690.59-0.047-1064.16
2-3115.7136746.152789.124842.89-2835.78-8432.870.980.84-0.013-239.67
3-12136.54137653.853192.125980.98-5746.9-18523.150.560.65-0.03-933.58
4-4239.84138561.544012.326715.74-7267.68-14675.930.550.88-0.01-326.14
518387.491310376.925416.8210603.98-11926.9-18828.630.451.510.0341414.42
614998.511310376.926366.4811271.69-16222.11-29769.920.391.310.0211153.73
715776.111310376.926556.4812545.2-16596.22-41260.210.41.320.0191213.55
829609.571311284.627119.0321229.17-24349.87-43914.150.291.610.0312277.66
929565.11139469.238745.3322270.83-12285.72-45260.430.711.60.0312274.24
1021145.221310376.928269.7921106.48-20517.56-49953.10.41.340.021626.56
Although, strategy looks good but profit factor on day 1 is less than minimum accepted value so avoid this, see below for further analysis.

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
atrnil23.7638844.621101147.629905.7917008.84-5473.94-7308.261.811.650.0471849.74
atrnil36.4313601.692161528.571541825513.26-5260.42-7308.262.931.170.013647.7
atrtrail32.95-5354.242271531.828622.4116143.78-4380.74-7308.261.970.92-0.0072-243.37
atrtrail22.55-18352.322271531.826765.5410762.52-4380.74-7308.261.540.72-0.03-834.2
atrtrail-13.48-31441.862161528.575711.5412777.99-4380.74-7308.261.30.52-0.058-1497.23

In the table above, row 1 shows the best exit criterion. Profit factor is 1.65. Strategy is showing mildly bearish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 47.62%, which is not acceptable. Avoid this strategy. Average return per trade is 0.92%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.047, 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.
HDFC Performance, Profit Factor:1.65

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018225 Jan 2018 (-1.81%), 31 Jan 2018 (3.94%)
2017106 Feb 2017 (-2.05%)
2016125 Jul 2016 (4.15%)
2012119 Jul 2012 (2.57%)
2010201 Oct 2010 (-2.68%), 04 Oct 2010 (5.38%)
2005216 Jun 2005 (-2.48%), 06 Jul 2005 (6.21%)
2003130 Dec 2003 (8.5%)
2002226 Nov 2002 (4.06%), 28 Nov 2002 (5.76%)
1999220 Jul 1999 (-3.65%), 21 Jul 1999 (-3.63%)
1997623 Jun 1997 (-2.26%), 25 Jun 1997 (-2.73%), 26 Jun 1997 (-2.87%), 08 Jul 1997 (-3.03%), 10 Jul 1997 (-2.92%), 11 Jul 1997 (5.86%)
1995118 Oct 1995 (3.09%)



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