Study: Buy JSWSTEEL when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy JSWSTEEL 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 JSWSTEEL 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
118404.1497277.785522.0614752.12-10125.15-13691.710.551.910.0652044.9
22366.8495455.5611930.3722670.93-14321.26-34867.830.831.040.0041262.98
384962.9395455.5630842.3896977.03-17312.24-45381.651.782.230.0679440.33
475360.7294544.4439489.37101572-16519.35-54766.852.391.910.0558373.41
510947594544.4446677.46136929-15447-45381.653.022.420.06612163.87
611639793633.3362096.28126965-11648.61-40748.445.332.670.07512933.02
786064.0996366.6726318.7190882.71-23949.38-51559.251.12.20.0699562.68
868018.3596366.6723329.1175840.39-23985.44-63914.460.971.950.0597557.59
976794.9697277.7823065.6799879.08-42332.37-78437.780.541.910.0538532.77
1083793.3197277.7823439.8284546.55-40142.72-77190.380.582.040.0639310.37
Although, strategy looks good but profit factor on day 2 is less than minimum accepted value so avoid this, see below for further analysis.
JSWSTEEL Performance, X=6, Profit Factor:2.67

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018105 Dec 2018 (-2.07%)
2014113 Feb 2014 (8.7%)
2011209 Aug 2011 (-2.8%), 26 Aug 2011 (20.96%)
2008304 Apr 2008 (-1.21%), 13 Oct 2008 (-20.37%), 27 Oct 2008 (63.48%)
2005224 Jun 2005 (-8.27%), 31 Oct 2005 (-0.21%)

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
atrnil310.1787347.35124833.3356998.68113459-17580.92-34267.953.241.620.0477278.95
atrnil27.3346706.54125741.6735113.6275639.18-18408.8-34267.951.911.360.0333892.21
atrtrail3537823.24136746.1528255.85113459-18815.98-34267.951.51.290.0212909.48
atrtrail-15.6911897.51136746.1523934.996702.59-18815.98-34267.951.271.090.0075915.19
atrtrail24.85-7117.46136746.1520765.7375639.18-18815.98-34267.951.10.95-0.0052-547.5

In the table above, row 1 shows the best exit criterion. Profit factor is 1.62. Strategy is showing mildly bullish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 33.33%, which is not acceptable. Avoid this strategy. Average return per trade is 3.64%, which is very good. Sharpe Ratio is 0.047, 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.
JSWSTEEL Performance, Profit Factor:1.62

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018205 Dec 2018 (-3.66%), 14 Dec 2018 (-3.81%)
2014113 Feb 2014 (11.76%)
2011209 Aug 2011 (-6.25%), 26 Aug 2011 (19.15%)
2008504 Apr 2008 (26.36%), 13 Oct 2008 (-13.5%), 15 Oct 2008 (-16.49%), 23 Oct 2008 (-17.13%), 27 Oct 2008 (56.73%)
2005224 Jun 2005 (-3.59%), 31 Oct 2005 (-5.89%)



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