Study: Buy M&M when RSI is oversold

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In this study, we evaluate the performance of strategy "Buy M&M 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 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. 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
1-62898.8663333504686.4712624.2-6592.49-25762.20.710.71-0.025-953.01
2-45190.14663333506167.9123219.09-7537.31-48850.950.820.82-0.014-684.7
3-1339.4866323448.488504.6839976.62-8043.8-68207.491.061-0.00031-20.3
41408906633335011540.0541554.65-7270.66-53342.091.591.590.0312134.69
514447566382857.5810868.2652432.35-9589.98-41339.461.131.540.032189.01
680804.3266372956.0610644.9656499.3-10795.14-30656.510.991.260.0171224.31
789949.8766372956.0611588.0647958.7-11683.05-36928.490.991.270.0171362.88
812054666382857.5812959.1457719.38-13282.19-33651.10.981.320.0211826.45
989958.1966372956.0613687.2569175.11-14361.03-44899.90.951.220.0141363
1012792266402660.6112988.1970091.65-15061.74-42326.020.861.330.021938.22
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
atrnil25.8290351114466840.3521372.4172959.89-10187.94-30785.132.11.420.0292546.94
atrtrail23.81218880130587244.6214421.4972959.89-8577.3-30785.131.681.350.0231683.69
atrnil310.59173641111327928.8331249.84109440-10460.17-30785.132.991.210.0141564.34
atrtrail34.58125031130567443.0813378.32109440-8434.53-30785.131.591.20.012961.77
atrtrail-15.2370988130567443.0812413.2782259.58-8434.53-30785.131.471.110.0078546.06

In the table above, row 1 shows the best exit criterion. Profit factor is 1.42. 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 40.35%, which is not acceptable. Avoid this strategy. Average return per trade is 1.27%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.029, 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.
M&M Performance, Profit Factor:1.42

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019925 Jan 2019 (-2.5%), 29 Jan 2019 (5.04%), 14 Feb 2019 (-2.86%), 18 Feb 2019 (5.73%), 08 May 2019 (-2.23%), 15 May 2019 (4.58%), 19 Jul 2019 (-2.79%), 24 Jul 2019 (-2.81%), 07 Aug 2019 (6.33%)
2018428 Sep 2018 (-3.91%), 03 Oct 2018 (-4.41%), 05 Oct 2018 (-4.61%), 11 Oct 2018 (9.42%)
2017406 Sep 2017 (-1.67%), 11 Sep 2017 (-2.09%), 25 Sep 2017 (-1.93%), 27 Sep 2017 (4.02%)
2016511 Jan 2016 (-2.68%), 11 Nov 2016 (-3.53%), 15 Nov 2016 (-3.79%), 21 Nov 2016 (-3.85%), 02 Dec 2016 (6.81%)
2015209 Feb 2015 (6.5%), 02 Sep 2015 (7.6%)
2014116 Oct 2014 (6.16%)
2013324 Jan 2013 (-2.39%), 12 Apr 2013 (5.2%), 21 Aug 2013 (-4.1%)
2012117 May 2012 (6.18%)
2011308 Feb 2011 (9.37%), 25 Feb 2011 (9.45%), 23 Nov 2011 (8.2%)
20081521 Jan 2008 (-6.69%), 22 Jan 2008 (18.03%), 04 Jun 2008 (-4.57%), 24 Jun 2008 (8.76%), 27 Jun 2008 (-5.57%), 30 Jun 2008 (-6.47%), 01 Jul 2008 (15.39%), 07 Oct 2008 (-6.54%), 10 Oct 2008 (-7.98%), 20 Oct 2008 (-10.0%), 22 Oct 2008 (-10.9%), 23 Oct 2008 (-12.43%), 24 Oct 2008 (-15.39%), 27 Oct 2008 (36.48%), 02 Dec 2008 (27.79%)
2007402 Mar 2007 (-5.09%), 05 Mar 2007 (11.68%), 20 Aug 2007 (-4.73%), 21 Aug 2007 (10.16%)
2005422 Mar 2005 (-3.7%), 28 Mar 2005 (7.48%), 15 Apr 2005 (-3.74%), 27 Apr 2005 (7.59%)
2003130 Jan 2003 (7.78%)
2002520 May 2002 (-4.8%), 22 May 2002 (10.73%), 30 Jul 2002 (-5.44%), 29 Aug 2002 (7.56%), 24 Sep 2002 (5.86%)
20011412 Mar 2001 (-8.48%), 13 Mar 2001 (20.42%), 14 Jun 2001 (-4.83%), 15 Jun 2001 (-5.19%), 22 Jun 2001 (-5.56%), 26 Jun 2001 (-5.75%), 27 Jun 2001 (-6.55%), 25 Jul 2001 (-4.98%), 31 Jul 2001 (10.57%), 31 Aug 2001 (-4.59%), 04 Sep 2001 (9.5%), 13 Sep 2001 (-5.81%), 14 Sep 2001 (-6.22%), 17 Sep 2001 (14.38%)
2000808 Mar 2000 (-11.41%), 12 May 2000 (24.8%), 24 Jul 2000 (-6.35%), 10 Oct 2000 (-5.22%), 13 Oct 2000 (-5.15%), 17 Oct 2000 (-5.67%), 23 Oct 2000 (-5.97%), 31 Oct 2000 (11.73%)
1999104 Oct 1999 (11.83%)
19981316 Jan 1998 (-4.31%), 27 Jan 1998 (-4.8%), 28 Jan 1998 (-5.24%), 11 Feb 1998 (10.84%), 20 May 1998 (-4.61%), 29 May 1998 (-4.17%), 01 Jun 1998 (-5.03%), 02 Jun 1998 (-5.88%), 16 Jun 1998 (-7.02%), 22 Jun 1998 (15.2%), 24 Jul 1998 (-6.23%), 27 Jul 1998 (-7.01%), 03 Aug 1998 (14.46%)
1997631 Mar 1997 (7.58%), 02 Sep 1997 (8.31%), 19 Nov 1997 (-4.12%), 20 Nov 1997 (8.61%), 12 Dec 1997 (-4.52%), 15 Dec 1997 (9.59%)
1996909 Jan 1996 (17.51%), 23 Sep 1996 (-2.25%), 27 Sep 1996 (-2.26%), 30 Sep 1996 (-2.38%), 04 Oct 1996 (-2.62%), 07 Oct 1996 (5.57%), 25 Nov 1996 (-3.34%), 27 Nov 1996 (-4.07%), 04 Dec 1996 (8.25%)
1995214 Nov 1995 (-2.63%), 17 Nov 1995 (6.57%)



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