Study: Sell LT when there is bearish divergence in RSI

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In this study, we evaluate the performance of strategy "Sell LT when there is bearish divergence in RSI" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: sell LT 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
1-20955.522391439.132746.47475.72-3262.36-12497.470.840.54-0.055-911.11
2-1606.8223121152.174640.513095.84-5208.43-20056.750.890.97-0.0026-69.86
312788.252314960.874011.187796.44-4818.7-20090.520.831.290.024556.01
4-38991.282391439.134939.538958.7-5960.5-17895.030.830.53-0.064-1695.27
5-77558.823101343.484491.0911683.73-9420.74-32218.630.480.37-0.086-3372.12
6-88077.623101343.483746.549756.44-9657.16-39984.850.390.3-0.095-3829.46
7-1122922371630.435104.9912319.1-9251.7-31226.750.550.24-0.13-4882.27
8-1717732381534.785221.449318.74-14236.28-53699.980.370.2-0.13-7468.38
9-2327602361726.094954.497807.98-15440.42-76667.180.320.11-0.15-10120.01
10-2184712371630.434771.439339.92-15741.94-80405.790.30.13-0.13-9498.74
Although, strategy looks good but profit factor on day 1 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
atrnil37.24-47542.283472720.5919297.0133529.59-6763.75-13270.882.850.74-0.032-1398.3
atrtrail23.79-37426.5339132633.337404.5122353.06-5141.74-11170.671.440.72-0.032-959.65
atrnil25.62-67263.123492526.4711880.3422353.06-6967.45-13270.881.710.61-0.057-1978.33
atrtrail33.95-56798.0739132633.335914.3921472.11-5141.74-11170.671.150.58-0.055-1456.36
atrtrail-14.18-88209.139122730.773884.9512282.06-4993.65-11170.670.780.35-0.11-2261.77

In the table above, row 1 shows the best exit criterion. Profit factor is 0.74. This strategy is not profitable and we advice you not to use it.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
LT Performance, Profit Factor:0.74

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019131 May 2019 (8.21%)
2018412 Jan 2018 (-1.77%), 31 Jan 2018 (-2.11%), 01 Feb 2018 (6.66%), 22 Nov 2018 (-1.94%)
2017212 Apr 2017 (-2.02%), 28 Apr 2017 (-1.72%)
2016107 Jun 2016 (-2.5%)
2014518 Mar 2014 (-2.53%), 26 Mar 2014 (-2.24%), 03 Apr 2014 (-2.43%), 27 May 2014 (-3.31%), 11 Jun 2014 (10.27%)
2012225 Jan 2012 (-3.64%), 27 Sep 2012 (-2.59%)
2010327 Sep 2010 (-2.12%), 30 Sep 2010 (-2.06%), 01 Oct 2010 (6.2%)
2009720 Apr 2009 (-5.41%), 04 May 2009 (-5.2%), 06 May 2009 (-4.98%), 22 May 2009 (-6.64%), 29 May 2009 (-5.83%), 08 Jun 2009 (-5.48%), 12 Jun 2009 (16.76%)
2007611 Jul 2007 (-2.65%), 13 Jul 2007 (-2.62%), 20 Jul 2007 (-2.82%), 03 Oct 2007 (-2.87%), 15 Oct 2007 (10.74%), 05 Nov 2007 (-5.52%)
2006203 Feb 2006 (-4.17%), 06 Feb 2006 (-4.15%)
2005104 Aug 2005 (8.69%)



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