Study: Sell ITC 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 ITC 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 ITC 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
112848.42213959.093058.587235.26-2990.35-7835.771.021.480.033584.02
210977.092213959.094026.3811693.35-4596.21-21454.390.881.270.016498.96
31009.1122121054.555245.7217855.41-6193.95-36981.350.851.020.0009745.87
41959812213959.0919440.49185087-6304.99-26109.593.084.450.0468908.25
52333252213959.0922159.92185465-6083.74-28509.473.645.260.05510605.7
62300152214863.6420102.67185369-6427.82-29145.583.135.470.05410455.22
72570432216672.7318713.01184773-7060.87-25242.162.657.070.06111683.77
82876242218481.8218257.12184917-10251.09-34061.011.788.010.06813073.81
92962332216672.7321075.92185034-6830.34-25936.13.098.230.0713465.13
103046642216672.7322176.75185279-8360.71-29926.272.657.070.07213848.35
Although, strategy looks good but profit factor on day 3 is less than minimum accepted value so avoid this, see below for further analysis.
ITC Performance, X=9, Profit Factor:8.23

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018110 Aug 2018 (-2.82%)
2017201 Feb 2017 (-0.41%), 05 Jun 2017 (3.35%)
2015123 Oct 2015 (5.92%)
2014125 Mar 2014 (4.78%)
2012228 Mar 2012 (-3.51%), 23 Apr 2012 (2.7%)
2011126 Apr 2011 (3.76%)
2009127 Jul 2009 (3.87%)
2008109 Jan 2008 (19.8%)
2005115 Sep 2005 (92.52%)
2004313 Jan 2004 (4.32%), 03 Dec 2004 (0.48%), 21 Dec 2004 (-0.1%)
2003202 Sep 2003 (6.69%), 17 Dec 2003 (2.88%)
2001103 Jan 2001 (8.39%)
1999112 Mar 1999 (3.75%)
1998111 Mar 1998 (-0.69%)
1997210 Jan 1997 (-12.97%), 29 Jan 1997 (1.39%)
1995119 Oct 1995 (4.01%)

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
atrtrail-17.0920495132141843.7519958.72185738-4137.3-9341.794.823.750.046404.71
atrtrail24.4158340.6632141843.759486.5718031.87-4137.3-9341.792.291.780.0491823.15
atrtrail35.0950379.6632141843.758917.9316189.85-4137.3-9341.792.161.680.0441574.36
atrnil25.818961.563012184010799.9518031.87-6146.55-9827.741.761.170.015632.05
atrnil39.27-8143.23082226.6715683.8527047.81-6073.36-9827.742.580.94-0.0055-271.44

In the table above, row 1 shows the best exit criterion. Profit factor is 3.75. Strategy is very good and impressively bearish. Percentage of profitable trades is 43.75%, which is not acceptable. Avoid this strategy. Average return per trade is 3.2%, which is very good. Sharpe Ratio is 0.04, 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.
ITC Performance, Profit Factor:3.75

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018210 Aug 2018 (-1.94%), 27 Aug 2018 (-1.22%)
2017401 Feb 2017 (-2.16%), 03 Feb 2017 (-2.23%), 07 Feb 2017 (3.19%), 05 Jun 2017 (3.38%)
2015123 Oct 2015 (4.44%)
2014125 Mar 2014 (4.11%)
2012228 Mar 2012 (-0.76%), 23 Apr 2012 (-2.17%)
2011126 Apr 2011 (2.5%)
2009227 Jul 2009 (-3.91%), 03 Aug 2009 (5.31%)
2008109 Jan 2008 (3.67%)
2005215 Sep 2005 (-1.8%), 20 Sep 2005 (92.87%)
2004513 Jan 2004 (-3.25%), 14 Jan 2004 (-2.24%), 03 Dec 2004 (-0.4%), 21 Dec 2004 (-1.3%), 29 Dec 2004 (-0.16%)
2003202 Sep 2003 (1.76%), 17 Dec 2003 (0.98%)
2001103 Jan 2001 (5.49%)
1999112 Mar 1999 (-2.61%)
1998211 Mar 1998 (-1.23%), 23 Mar 1998 (2.31%)
1997410 Jan 1997 (-3.76%), 16 Jan 1997 (-4.67%), 22 Jan 1997 (-1.43%), 29 Jan 1997 (4.32%)
1995119 Oct 1995 (5.38%)



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