Study: Buy IDEA when RSI is oversold

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In this study, we evaluate the performance of strategy "Buy IDEA when RSI is oversold" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: buy IDEA 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
122540.942222052.386492.1220618.56-6014.29-21333.331.081.190.019536.69
226575.942222052.387505.2323676.01-6926.96-18452.81.081.190.019632.76
3-59560.9842241857.147618.0932243.35-13466.4-64321.610.570.75-0.027-1418.12
4-53766.6842241857.148967.7324691.36-14944.01-69346.730.60.8-0.022-1280.16
55534.0742251759.5210744.2741121.5-15474.86-62311.560.691.020.0022131.76
650677.542241857.1413832.2941771.32-15627.64-66331.660.891.180.0181206.61
76936.0942231954.7615561.7245575.76-18472.82-72361.810.841.020.0021165.14
8-63699.242251759.5213343.433575.68-23369.66-79396.980.570.84-0.018-1516.65
9-18421442202247.6214116.6836615.99-21206.71-86432.160.670.61-0.051-4386.05
10-22663342231954.7612374.234502.37-26907.34-92462.310.460.56-0.059-5396.02
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
atrnil26.73652.7567214631.3427613.8265404.53-12592.12-30971.562.1910.000139.74
atrnil310.78-1766706513522037689.4698106.8-12819.86-30971.562.940.73-0.034-2718
atrtrail24.42-15664579215826.5818681.9265404.53-9464.91-30971.561.970.71-0.034-1982.84
atrtrail34.73-24712379215826.5814373.4533347.08-9464.91-30971.561.520.55-0.067-3128.13
atrtrail-14.94-28701678205825.6412999.5335004.01-9431.16-30971.561.380.48-0.083-3679.7

In the table above, row 1 shows the best exit criterion. Profit factor is 1. 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 31.34%, which is not acceptable. Avoid this strategy. Average return per trade is 0.0049%, which is low, don't trade solely on the basis of this study. Sharpe Ratio is 0.00013, 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.
IDEA Performance, Profit Factor:1

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
20191428 Jan 2019 (-5.5%), 29 Mar 2019 (-12.47%), 03 Apr 2019 (-12.75%), 08 May 2019 (-8.75%), 14 May 2019 (-8.44%), 15 May 2019 (-9.26%), 17 May 2019 (19.46%), 19 Jun 2019 (12.95%), 24 Jul 2019 (-5.99%), 26 Jul 2019 (-6.61%), 29 Jul 2019 (-11.27%), 05 Aug 2019 (-11.85%), 07 Aug 2019 (25.76%), 22 Aug 2019 (26.19%)
20181206 Feb 2018 (-5.48%), 09 Mar 2018 (-3.92%), 16 Apr 2018 (-3.55%), 26 Apr 2018 (-3.46%), 03 May 2018 (-4.02%), 08 May 2018 (-4.15%), 10 May 2018 (-4.24%), 11 May 2018 (11.05%), 24 Sep 2018 (-6.12%), 25 Sep 2018 (-6.38%), 28 Sep 2018 (-6.65%), 04 Oct 2018 (15.46%)
20161112 Jan 2016 (-3.28%), 13 Jan 2016 (-3.6%), 15 Jan 2016 (-4.27%), 22 Jan 2016 (-5.17%), 03 Feb 2016 (-4.85%), 10 Feb 2016 (9.78%), 10 Aug 2016 (7.12%), 01 Sep 2016 (-4.07%), 26 Sep 2016 (-2.98%), 13 Oct 2016 (-3.2%), 17 Oct 2016 (6.9%)
2015224 Aug 2015 (-3.69%), 10 Nov 2015 (7.09%)
2014427 Jan 2014 (-3.74%), 28 Jan 2014 (8.55%), 10 Feb 2014 (11.02%), 10 Dec 2014 (8.18%)
2012518 Apr 2012 (-3.48%), 19 Apr 2012 (-3.7%), 23 Apr 2012 (-4.36%), 24 Apr 2012 (-4.95%), 09 Aug 2012 (8.08%)
2011124 Feb 2011 (13.41%)
2010312 May 2010 (10.3%), 20 May 2010 (-6.47%), 26 May 2010 (12.61%)
2009605 Oct 2009 (-3.48%), 06 Oct 2009 (-4.79%), 14 Oct 2009 (-4.82%), 23 Oct 2009 (-4.44%), 27 Oct 2009 (-4.91%), 03 Nov 2009 (11.76%)
2008923 Jan 2008 (-9.85%), 01 Jul 2008 (-6.91%), 15 Jul 2008 (15.29%), 08 Oct 2008 (-7.68%), 10 Oct 2008 (16.29%), 21 Oct 2008 (-11.33%), 22 Oct 2008 (-13.27%), 23 Oct 2008 (-15.49%), 27 Oct 2008 (32.7%)



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