Study: Buy ITC when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy ITC 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 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. 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
1-5074.7114736.364638.378228.67-3375.46-12829.711.370.79-0.018-461.34
214184.06116554.556674.3112069.58-5172.35-16543.571.291.550.0341289.46
38830.25116554.557084.4716890.43-6735.31-16712.391.051.260.018802.75
414478.78117463.647103.4418536.16-8811.32-13897.760.811.410.0271316.25
551813.31118372.739815.9919402.34-8904.87-15462.431.12.940.0934710.3
657906.31117463.6412682.5823040.28-7717.95-17341.041.642.880.0895264.21
767050.1119281.8210242.7721048.07-12567.41-13872.830.823.670.126095.46
848594.77118372.739907.7725378.95-10222.45-15534.680.972.580.0784417.71
957198.75119281.829655.2922260.72-14849.42-15175.720.652.930.0975199.89
1073891.55118372.7313926.4526158.51-12506.68-19075.141.112.970.0996717.41
Although, strategy looks good but profit factor on day 1 is less than minimum accepted value so avoid this, see below for further analysis.
ITC Performance, X=7, Profit Factor:3.67

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019121 Aug 2019 (1.74%)
2007120 Mar 2007 (7.31%)
2005529 Sep 2005 (-6.94%), 14 Oct 2005 (-5.63%), 28 Oct 2005 (10.52%), 21 Nov 2005 (8.01%), 05 Dec 2005 (7.38%)
2002125 Apr 2002 (4.26%)
2001125 Sep 2001 (2.18%)
1998110 Jun 1998 (1.34%)
1995109 May 1995 (3.36%)

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
atrnil3207.8849775683537.5178170467042-7350.46-10177.3224.2414.540.08262219.54
atrnil21563362788445091866.62311361-7797.15-10177.3211.7811.780.08342034.73
atrtrail310.4428371.7694544.4413477.2527364.46-5107.45-8638.452.642.110.0513152.42
atrtrail29.5621928.1694544.4411866.3526734.64-5107.45-8638.452.321.860.0432436.46
atrtrail-110.5616735.6394544.4410568.2224056.76-5107.45-8638.452.071.660.0361859.51

In the table above, row 1 shows the best exit criterion. Profit factor is 14.54. Number of signals (total trades) generated is low, don't trade solely on the basis of this study. Strategy is very good and impressively bullish. Percentage of profitable trades is 37.5%, which is not acceptable. Avoid this strategy. Average return per trade is 31.11%, which is very good. Sharpe Ratio is 0.082, which is low, don't trade solely on the basis of this study. Average holding period is on the higher side, note this before entering the trade that you you may need to hold the positions for a longer time.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
ITC Performance, Profit Factor:14.5

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019121 Aug 2019 (-2.38%)
2005129 Sep 2005 (233.52%)
2002125 Apr 2002 (-2.78%)
2001125 Sep 2001 (20.05%)
1998110 Jun 1998 (-5.09%)
1995309 May 1995 (-3.8%), 10 May 1995 (-4.32%), 16 May 1995 (13.68%)



View performance of other stocks for this trading system.

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