Study: Buy ITC when RSI is oversold

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In this study, we evaluate the performance of strategy "Buy ITC 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 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
117900.8339211853.854645.8710941.67-4425.69-12967.131.051.220.017459
238691.2439211853.856604.8520599.23-5556.14-13686.431.191.390.027992.08
396065.1939261366.676748.2618545.16-6106.89-21748.31.112.210.0612463.21
455516.3139231658.978100.1222314.24-8174.16-23576.280.991.420.0291423.5
534481.2339201951.289545.7922621.9-8233.4-34458.951.161.220.016884.13
691537.8539221756.419620.4820918.64-7065.46-21482.891.361.760.0472347.12
716464939241561.5412274.5236040.18-8662.62-24182.511.422.270.0674221.77
822873339271269.2312861.234797.94-9876.65-22585.551.32.930.0915864.94
921181839231658.9715340.2955870.64-8813.02-20441.241.742.50.0715431.24
1015865939221756.4114838.9461963.91-9870.46-31368.821.51.950.054068.18
Although, strategy looks good but profit factor on day 5 is less than minimum accepted value so avoid this, see below for further analysis.
ITC Performance, X=8, Profit Factor:2.93

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019207 Aug 2019 (-4.81%), 23 Aug 2019 (3.45%)
2018105 Oct 2018 (3.6%)
2017127 Sep 2017 (2.98%)
2015126 Mar 2015 (7.68%)
2014123 Jun 2014 (5.21%)
2013121 Aug 2013 (6.5%)
2011102 Feb 2011 (-0.94%)
2010126 Feb 2010 (10.08%)
2009109 Mar 2009 (10.14%)
2008203 Jul 2008 (-5.23%), 08 Oct 2008 (1.99%)
2007112 Mar 2007 (0.5%)
2006106 Jun 2006 (6.98%)
2005621 Sep 2005 (-2.35%), 05 Oct 2005 (-5.29%), 20 Oct 2005 (4.16%), 07 Nov 2005 (3.69%), 22 Nov 2005 (8.55%), 05 Dec 2005 (4.58%)
2004110 May 2004 (-11.17%)
2002408 Apr 2002 (-1.07%), 25 Apr 2002 (4.99%), 23 May 2002 (6.65%), 30 Oct 2002 (0.07%)
2001207 Feb 2001 (0.75%), 17 Sep 2001 (-3.91%)
2000124 Apr 2000 (6.3%)
1999421 Sep 1999 (-6.18%), 05 Oct 1999 (3.41%), 01 Nov 1999 (17.4%), 13 Dec 1999 (12.95%)
1998101 Jun 1998 (-6.61%)
1996219 Jan 1996 (12.8%), 06 Nov 1996 (10.82%)
1995421 Mar 1995 (7.57%), 25 Apr 1995 (-11.29%), 10 May 1995 (9.83%), 21 Nov 1995 (-0.41%)

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
atrnil344.228389045016343269060.86704980-7825.58-12372.88.834.150.03416778.08
atrnil235.3856565052213140.3838519.78469986-7847.28-12372.84.913.330.03410877.88
atrtrail35.2595125.6764234135.9414962.1939247.51-6073.29-15722.52.461.380.0241486.34
atrtrail24.4235617.3664234135.9412374.8726930.66-6073.29-15722.52.041.140.011556.52
atrtrail-15.979886.3864234135.9411256.1328577.5-6073.29-15722.51.851.040.0031154.47

In the table above, row 1 shows the best exit criterion. Profit factor is 4.15. Strategy is very good and impressively bullish. Percentage of profitable trades is 32%, which is not acceptable. Avoid this strategy. Average return per trade is 8.39%, which is very good. Sharpe Ratio is 0.034, 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:4.15

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019407 Aug 2019 (-1.9%), 13 Aug 2019 (-2.15%), 21 Aug 2019 (-2.38%), 23 Aug 2019 (7.39%)
2018205 Oct 2018 (-2.9%), 09 Oct 2018 (9.11%)
2017127 Sep 2017 (6.07%)
2015126 Mar 2015 (8.09%)
2014123 Jun 2014 (7.44%)
2013121 Aug 2013 (-4.16%)
2005121 Sep 2005 (352.49%)
2004510 May 2004 (-3.24%), 11 May 2004 (-3.77%), 13 May 2004 (-4.12%), 14 May 2004 (-4.55%), 17 May 2004 (16.87%)
2002508 Apr 2002 (-2.82%), 09 Apr 2002 (-3.0%), 25 Apr 2002 (-2.78%), 23 May 2002 (8.5%), 30 Oct 2002 (7.65%)
2001307 Feb 2001 (-4.24%), 17 Sep 2001 (-6.19%), 26 Sep 2001 (20.03%)
2000124 Apr 2000 (29.91%)
1999721 Sep 1999 (-3.41%), 27 Sep 1999 (-3.8%), 04 Oct 1999 (-4.02%), 01 Nov 1999 (19.62%), 13 Dec 1999 (-4.41%), 14 Dec 1999 (-4.69%), 17 Dec 1999 (15.15%)
1998301 Jun 1998 (-4.11%), 02 Jun 1998 (-4.41%), 08 Jun 1998 (-4.91%)
1996519 Jan 1996 (-3.51%), 23 Jan 1996 (-4.04%), 24 Jan 1996 (13.43%), 06 Nov 1996 (-5.22%), 07 Nov 1996 (16.49%)
19951021 Mar 1995 (-4.86%), 23 Mar 1995 (-4.94%), 28 Apr 1995 (-3.51%), 02 May 1995 (-3.81%), 08 May 1995 (-4.01%), 10 May 1995 (-4.32%), 12 May 1995 (-4.58%), 15 May 1995 (14.24%), 21 Nov 1995 (-4.1%), 23 Nov 1995 (-4.18%)



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