Study: Sell MCDOWELL-N when RSI is overbought

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In this study, we evaluate the performance of strategy "Sell MCDOWELL-N when RSI is overbought" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: sell MCDOWELL-N 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
166311.1577473061.044845.7819750.64-5381.35-26849.320.91.410.03861.18
254178.5177473061.046263.8723057.22-8007.45-33800.440.781.230.018703.62
317418.5477443357.147120.6523560.61-8966.36-47336.510.791.060.005226.21
412052677463159.748999.4229629.38-9466.03-32428.940.951.410.0321565.28
564538.6377423554.559617.7527450.72-9697.33-35055.380.991.190.016838.16
620278.5877423554.5510008.5725160.26-11430.9-49203.290.881.050.0044263.36
7-24216.4177453258.4410266.8724560.99-15194.54-50989.640.680.95-0.0046-314.5
8-11077177374048.0511847.6629417.81-13728.37-51603.570.860.8-0.02-1438.59
9-19423277354245.4512297.1531680.11-14872.2-80636.60.830.69-0.033-2522.5
10-25794677334442.8613160.6529196.35-15732.91-1283820.840.63-0.037-3349.95

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 1.41. Strategy is showing mildly bearish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 61.04%, which is good. Average return per trade is 0.43%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.03, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability. Win loss ratio is less than 1 which is bad, avoid this strategy.

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
nilnil-1166311.1577473061.044845.7819750.64-5381.35-26849.320.91.410.03861.18
atrtrail23.5921094.31706210836.4710857.4924925.97-6037.69-11966.061.81.030.003124.08
atrnil24.814501.271565410234.6215828.0624925.97-8335.43-13155.511.91.010.0005828.85
atrtrail34.21-81159.071696010935.59638.3932207.11-6050.11-11966.061.590.88-0.012-480.23
atrtrail-14.65-94956.881685910935.129550.7553283.94-6040.84-11966.061.580.86-0.013-565.22
atrnil37.26-1940591523311921.7123699.8936821.53-8202.99-13155.512.890.8-0.022-1276.7

In the table above, row 1 shows the best exit criterion. Profit factor is 1.41. Strategy is showing mildly bearish results but we advice not to take a call solely on the basis of this study. Percentage of profitable trades is 61.04%, which is good. Average return per trade is 0.43%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.03, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability. Win loss ratio is less than 1 which is bad, avoid this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
MCDOWELL-N Performance, X=1, Profit Factor:1.41

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019126 Sep 2019 (0.99%)
2018305 Jan 2018 (0.75%), 01 Nov 2018 (0.78%), 16 Nov 2018 (-0.59%)
2017817 Jan 2017 (-0.93%), 10 Feb 2017 (0.32%), 05 Jun 2017 (2.18%), 05 Jul 2017 (1.55%), 19 Jul 2017 (1.34%), 27 Oct 2017 (-1.65%), 17 Nov 2017 (-1.86%), 21 Dec 2017 (-0.29%)
2016205 Jul 2016 (2.13%), 04 Oct 2016 (-0.4%)
2015412 Jan 2015 (-1.95%), 27 Jan 2015 (0.86%), 04 Mar 2015 (-0.15%), 04 Nov 2015 (1.69%)
2014510 Jan 2014 (1.02%), 21 Mar 2014 (-1.85%), 16 Apr 2014 (0.64%), 27 Oct 2014 (-0.74%), 02 Dec 2014 (0.1%)
2013417 Apr 2013 (2.77%), 06 May 2013 (-2.58%), 17 May 2013 (0.91%), 18 Jul 2013 (2.14%)
2012806 Feb 2012 (6.86%), 09 Apr 2012 (1.22%), 20 Jul 2012 (1.51%), 21 Aug 2012 (3.71%), 04 Sep 2012 (-0.44%), 25 Sep 2012 (-0.74%), 12 Nov 2012 (1.56%), 27 Nov 2012 (1.57%)
2011107 Jul 2011 (2.58%)
2010405 Mar 2010 (0.81%), 16 Jul 2010 (-2.9%), 01 Sep 2010 (2.23%), 17 Sep 2010 (-0.06%)
2009520 May 2009 (3.92%), 03 Jun 2009 (3.45%), 16 Oct 2009 (0.86%), 11 Nov 2009 (3.36%), 30 Nov 2009 (-0.25%)
2007501 Feb 2007 (-1.86%), 17 May 2007 (-5.05%), 31 May 2007 (3.96%), 23 Jul 2007 (9.88%), 07 Sep 2007 (-2.66%)
2006727 Jan 2006 (3.08%), 13 Feb 2006 (-0.78%), 07 Mar 2006 (3.92%), 24 Mar 2006 (2.37%), 10 Aug 2006 (-0.52%), 05 Sep 2006 (0.53%), 31 Oct 2006 (-7.94%)
2005723 Feb 2005 (3.16%), 10 Mar 2005 (-10.01%), 05 Apr 2005 (-5.01%), 21 Apr 2005 (-5.0%), 23 May 2005 (4.33%), 26 Aug 2005 (-1.77%), 13 Sep 2005 (2.11%)
2004717 Apr 2004 (4.84%), 23 Jul 2004 (1.92%), 10 Aug 2004 (5.28%), 01 Sep 2004 (2.55%), 08 Nov 2004 (0.73%), 24 Nov 2004 (-4.04%), 09 Dec 2004 (1.65%)
2003514 May 2003 (-2.45%), 13 Jun 2003 (-2.8%), 02 Jul 2003 (2.66%), 06 Nov 2003 (-13.42%), 28 Nov 2003 (2.1%)
2002109 Jul 2002 (5.05%)



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