Study: Buy LICHSGFIN when there is bullish divergence in RSI and ADX is Trending

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In this study, we evaluate the performance of strategy "Buy LICHSGFIN when there is bullish 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: buy LICHSGFIN 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
1-35889.231688504215.713783.4-8701.86-21320.670.480.48-0.052-2243.08
2-32227.161661037.54192.279921.67-5738.08-16637.890.730.44-0.065-2014.2
3-7384.261661037.58716.3419578.06-5968.23-13832.541.460.88-0.011-461.52
431150.0716885011135.9351926.86-7242.17-15451.011.541.540.0271946.88
535399.95167943.7516807.1473699.02-9138.89-19680.621.841.430.0222212.5
654408.7216885016971.9865654.01-10170.89-21126.461.671.670.0353400.54
78157.171661037.516591.2154627.29-9139.01-18424.241.821.090.006509.82
8-7232.94167943.7516249.4858790.44-13442.15-22507.551.210.94-0.0047-452.06
920839.9116885018076.0485682.14-15471.05-33005.891.171.170.011302.49
1023728.15167943.7519909.1467904.36-12848.43-29585.671.551.210.0141483.01
Although, strategy looks good but profit factor on day 2 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
atrtrail34.528178.742161528.5719503.0775231.53-7255.98-13786.172.691.080.0043389.46
atrnil38.24-4547.12141719.0537748.5775231.53-9149.49-16874.744.130.97-0.0021-216.53
atrtrail24.1-3817.192161528.5717503.7550154.35-7255.98-13786.172.410.96-0.0025-181.77
atrnil25.19-15787.042161528.5721120.6450154.35-9500.73-16874.742.220.89-0.0096-751.76
atrtrail-14.71-18293.692161528.5715090.9947947.85-7255.98-13786.172.080.83-0.013-871.13

In the table above, row 1 shows the best exit criterion. Profit factor is 1.08. 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 28.57%, which is not acceptable. Avoid this strategy. Average return per trade is 0.19%, which is low, don't trade solely on the basis of this study. Sharpe Ratio is 0.0043, 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.
LICHSGFIN Performance, Profit Factor:1.08

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019321 Aug 2019 (-3.67%), 03 Sep 2019 (-4.64%), 06 Sep 2019 (-2.2%)
2018101 Oct 2018 (-4.49%)
2017308 Aug 2017 (-2.59%), 21 Aug 2017 (2.57%), 14 Dec 2017 (-0.47%)
2013328 Feb 2013 (-1.85%), 05 Aug 2013 (-6.19%), 06 Aug 2013 (6.35%)
2010208 Dec 2010 (-6.89%), 10 Dec 2010 (1.61%)
2008127 Oct 2008 (37.62%)
2002201 Nov 2002 (-2.09%), 20 Nov 2002 (10.1%)
1997415 Oct 1997 (-4.79%), 21 Oct 1997 (-4.68%), 10 Nov 1997 (-5.43%), 25 Nov 1997 (0.27%)
1995215 Sep 1995 (-0.41%), 12 Oct 1995 (-4.02%)



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