Study: Buy M&M when above 200 SMA and RSI is oversold

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In this study, we evaluate the performance of strategy "Buy M&M when above 200 SMA and 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
1-3721.2895455.563528.135684.52-5340.48-15911.750.660.83-0.014-413.48
2-21583.9994544.444195.226824.71-7672.97-16110.110.550.44-0.067-2398.22
3-4026.9395455.565167.0416392.93-7465.53-15389.980.690.87-0.011-447.44
416438.2894544.4413117.3733724.39-7206.24-21232.361.821.460.0271826.48
539507.2294544.4419695.2552432.35-7854.76-20001.162.512.010.0464389.69
648235.895455.5617506.9456499.3-9824.73-22335.791.782.230.0515359.53
751558.7495455.5617202.4847958.7-8613.42-22498.422.50.0625728.75
840209.394544.4423552.6457719.38-10800.25-30385.042.181.740.0394467.7
930358.6894544.4420001.8246550.92-9929.72-21476.282.011.610.0353373.19
1028423.194544.4420463.0943610.2-10685.85-26006.161.911.530.0333158.12
Although, strategy looks good but profit factor on day 2 is less than minimum accepted value so avoid this, see below for further analysis.
M&M Performance, X=7, Profit Factor:2.5

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018128 Sep 2018 (-11.25%)
2017106 Sep 2017 (-1.69%)
2014116 Oct 2014 (4.77%)
2013124 Jan 2013 (0.75%)
2007102 Mar 2007 (-1.32%)
2005122 Mar 2005 (2.05%)
1999104 Oct 1999 (23.98%)
1997102 Sep 1997 (11.45%)
1996123 Sep 1996 (-2.97%)

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
atrtrail33.4629182.94136746.1510955.8535493.49-5221.74-10171.492.11.80.0362244.84
atrtrail-14.0825826.22136746.1510396.442935.92-5221.74-10171.491.991.710.0311986.63
atrtrail23.0820752.91136746.159550.8523662.33-5221.74-10171.491.831.570.0321596.38
atrnil312.2312659.641331023.0826305.3235493.49-6625.63-11489.083.971.190.014973.82
atrnil29.778787.8134930.7716891.5723662.33-6530.94-11489.082.591.150.012675.98

In the table above, row 1 shows the best exit criterion. Profit factor is 1.8. 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 46.15%, which is not acceptable. Avoid this strategy. Average return per trade is 1.12%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.036, 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:1.8

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018128 Sep 2018 (-3.91%)
2017106 Sep 2017 (0.09%)
2014116 Oct 2014 (0.3%)
2013124 Jan 2013 (0.64%)
2007202 Mar 2007 (-5.09%), 06 Mar 2007 (-0.38%)
2005222 Mar 2005 (-3.7%), 28 Mar 2005 (1.62%)
1999104 Oct 1999 (17.75%)
1997102 Sep 1997 (12.47%)
1996323 Sep 1996 (-0.56%), 27 Sep 1996 (-2.26%), 30 Sep 1996 (-2.38%)



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