Study: Sell ICIL when there is bearish divergence in RSI

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

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: sell ICIL 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
1-25018.73114736.366095.9311320.75-7057.49-19250.650.860.49-0.087-2274.43
2-60252.32115645.457748.3213836.48-16498.99-31395.350.470.39-0.12-5477.48
3-165774115645.455194.0111837.46-31957.29-46887.630.160.14-0.23-15070.34
4-193824114736.367194.3315930.51-31800.15-74174.390.230.13-0.23-17620.34
5-169279113827.2710125.1311722.49-24956.8-68899.980.410.15-0.22-15389
6-233804111109.0910287.0810287.08-24409.11-92230.930.420.042-0.26-21254.92
7-272627111109.0912200.9612200.96-28482.8-1214540.430.043-0.23-24784.28
8-346241112918.187859.8713157.89-40217.8-1535760.20.043-0.23-31476.41
9-347969112918.187147.88612.44-40251.59-1531000.180.039-0.23-31633.52
10-311223112918.1812411.5220995.29-37338.46-1562840.330.074-0.19-28293.01

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 0.49. This strategy is not profitable and we advice you not to use it.

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
atrnil23.94-15164.131751229.4123516.0826860.71-11062.05-14929.172.130.89-0.018-892.01
atrtrail23.06-24454.571751229.4118693.925397.52-9827.01-14929.171.90.79-0.032-1438.5
nilnil-11-25018.73114736.366095.9311320.75-7057.49-19250.650.860.49-0.087-2274.43
atrnil36.41-137813171165.8840291.0640291.06-11131.53-14929.173.620.23-0.21-8106.67
atrtrail33.35-96477.291751229.414289.368768.8-9827.01-14929.170.440.18-0.25-5675.13
atrtrail-13.35-96477.291751229.414289.368768.8-9827.01-14929.170.440.18-0.25-5675.13

In the table above, row 1 shows the best exit criterion. Profit factor is 0.89. Profit factor is showing that this strategy doesn't give any edge over rendomness and it is only as good as tossing a coin and doing the trade. Percentage of profitable trades is 29.41%, which is not acceptable. Avoid this strategy. Average return per trade is -0.45%, we advise you not to use this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
ICIL Performance, Profit Factor:0.886

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2017115 Mar 2017 (-3.97%)
2015330 Jan 2015 (-5.24%), 25 Jun 2015 (-4.28%), 06 Jul 2015 (-4.48%)
20141208 Jan 2014 (12.7%), 20 May 2014 (-7.46%), 06 Jun 2014 (-7.0%), 02 Jul 2014 (-6.09%), 08 Jul 2014 (-5.49%), 14 Jul 2014 (-5.35%), 21 Jul 2014 (10.81%), 30 Jul 2014 (-5.45%), 08 Aug 2014 (-5.51%), 11 Aug 2014 (10.93%), 07 Nov 2014 (-6.04%), 25 Nov 2014 (13.43%)
2009115 Jul 2009 (10.92%)



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