Study: Sell M&M when there is bearish divergence in RSI and ADX is Trending

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In this study, we evaluate the performance of strategy "Sell M&M when there is bearish 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: sell M&M 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
1-39751.62992031.033417.267156.57-3525.35-17346.660.970.44-0.06-1370.74
2-95700.1929121741.383409.538679.18-8036.15-18397.150.420.3-0.093-3300.01
3-11093029131644.833227.417904.25-9555.41-22117.010.340.27-0.096-3825.18
4-11804929111837.933013.849832.33-8400.05-23266.820.360.22-0.1-4070.64
5-82108.6729111837.934888.7816358.93-7549.18-21981.740.650.4-0.072-2831.33
6-92067.529111837.935612.3319017.04-8544.62-28204.260.660.4-0.064-3174.74
7-11367229141548.283657.7921853.54-10992.06-33561.830.330.31-0.075-3919.72
8-10225129101934.487183.6317643.39-9162.51-26048.810.780.41-0.067-3525.91
9-14627529101934.486779.518838.64-11266.82-29147.240.60.32-0.089-5043.95
10-14134729121741.387094.0228043.89-13322.05-27798.440.530.38-0.078-4874.02

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 0.44. This strategy is not profitable and we advice you not to use it.

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
atrtrail23.75-56051.8460164426.6711834.422972.34-5577.32-11944.752.120.77-0.022-934.2
atrnil24.58-10865255144125.4514511.9222972.34-7605.33-11944.751.910.65-0.04-1975.49
atrtrail34.3-133659601545257609.323902.95-5506.64-11944.751.380.46-0.066-2227.66
nilnil-11-39751.62992031.033417.267156.57-3525.35-17346.660.970.44-0.06-1370.74
atrnil36.49-2264145564910.9123373.5434458.5-7482.75-11944.753.120.38-0.082-4116.61
atrtrail-14.4-156642601545256077.1313515.73-5506.64-11944.751.10.37-0.091-2610.7

In the table above, row 1 shows the best exit criterion. Profit factor is 0.77. 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 26.67%, which is not acceptable. Avoid this strategy. Average return per trade is -0.47%, we advise you not to use this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
M&M Performance, Profit Factor:0.772

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018107 May 2018 (4.41%)
2014127 Aug 2014 (-0.3%)
2012204 Oct 2012 (-2.26%), 05 Oct 2012 (2.44%)
2010201 Oct 2010 (-2.66%), 06 Oct 2010 (5.38%)
2009209 Jun 2009 (-5.97%), 12 Jun 2009 (11.49%)
2006819 Jan 2006 (-2.66%), 25 Jan 2006 (-2.59%), 08 Feb 2006 (-2.61%), 10 Feb 2006 (-2.55%), 15 Feb 2006 (-2.97%), 16 Feb 2006 (5.91%), 14 Nov 2006 (-1.85%), 22 Nov 2006 (-0.36%)
20051127 Jun 2005 (1.72%), 06 Jul 2005 (-2.73%), 11 Jul 2005 (-0.28%), 19 Jul 2005 (-0.45%), 04 Aug 2005 (-2.5%), 18 Aug 2005 (-1.37%), 26 Aug 2005 (6.7%), 30 Nov 2005 (-3.28%), 01 Dec 2005 (-1.83%), 09 Dec 2005 (-2.91%), 16 Dec 2005 (-2.41%)
20031627 May 2003 (-0.89%), 29 May 2003 (5.08%), 30 Jun 2003 (-3.1%), 07 Jul 2003 (-3.25%), 10 Jul 2003 (-4.03%), 29 Jul 2003 (-4.3%), 01 Aug 2003 (-2.62%), 11 Aug 2003 (-2.65%), 18 Aug 2003 (7.56%), 14 Oct 2003 (-4.07%), 16 Oct 2003 (-4.01%), 17 Oct 2003 (7.97%), 25 Oct 2003 (-2.76%), 29 Oct 2003 (-5.0%), 31 Oct 2003 (-4.63%), 06 Nov 2003 (1.1%)
2002328 Nov 2002 (-2.93%), 03 Dec 2002 (-1.72%), 05 Dec 2002 (5.86%)
2001212 Nov 2001 (-4.68%), 21 Nov 2001 (11.47%)
2000217 Jan 2000 (-5.96%), 18 Jan 2000 (-5.97%)
1999724 Feb 1999 (-2.36%), 03 Mar 1999 (-1.78%), 27 Jul 1999 (-2.15%), 29 Jul 1999 (-4.18%), 09 Aug 1999 (1.7%), 18 Aug 1999 (-3.46%), 20 Aug 1999 (10.51%)
1997325 Jun 1997 (-1.53%), 09 Jul 1997 (-0.12%), 21 Jul 1997 (5.38%)



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