Study: Buy MRF when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy MRF when there is bullish divergence in RSI" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: buy MRF 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
1-38411.7128111739.292822.638451.48-4085.92-11998.750.690.45-0.061-1371.85
2-50406.1728131546.434498.5613622.35-7259.16-18437.130.620.54-0.049-1800.22
3-61442.7128111739.296403.3813194.94-7757.64-16772.10.830.53-0.054-2194.38
4-63019.8328121642.867444.0818886.74-9521.8-22198.990.780.59-0.045-2250.71
5-15456.7928121642.8610953.4629463.04-9181.15-26814.411.190.89-0.0086-552.03
6-8945.828121642.8613895.0629096.71-10980.41-24043.241.270.95-0.0046-319.49
7-89436.8228111739.2913253.8726430.58-13837.02-33308.120.960.62-0.041-3194.17
8-12053828101835.7117199.3434777.2-16251.73-47568.591.060.59-0.043-4304.92
9-10690728111739.2916090.6646987.42-16700.25-45517.120.960.62-0.039-3818.11
10-88012.342891932.1419075.5743724.65-13668.02-39834.231.40.66-0.034-3143.3
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
atrnil38.03-3508.693592625.7126896.3342173.05-9445.22-16166.232.850.99-0.0012-100.25
atrtrail34.67-33834.654093122.520018.739042.92-6903.32-14144.932.90.84-0.014-845.87
atrtrail-15.28-69219.54093122.516087.0432047.29-6903.32-14144.932.330.68-0.033-1730.49
atrtrail24.35-70066.934093122.515992.8928115.37-6903.32-14144.932.320.67-0.034-1751.67
atrnil26.63-84197.673592625.7117930.8828115.37-9445.22-16166.231.90.66-0.039-2405.65

In the table above, row 1 shows the best exit criterion. Profit factor is 0.99. 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 25.71%, which is not acceptable. Avoid this strategy. Average return per trade is -0.05%, we advise you not to use this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
MRF Performance, Profit Factor:0.986

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019118 Feb 2019 (7.56%)
2018325 Sep 2018 (-2.92%), 03 Oct 2018 (-3.25%), 09 Oct 2018 (9.59%)
2016101 Feb 2016 (-3.26%)
2011318 Jan 2011 (-3.69%), 04 Feb 2011 (-4.0%), 09 Feb 2011 (13.26%)
2010208 Dec 2010 (-4.3%), 10 Dec 2010 (-4.72%)
2008818 Mar 2008 (-7.07%), 16 Jul 2008 (13.88%), 26 Sep 2008 (-4.18%), 03 Oct 2008 (-5.41%), 15 Oct 2008 (-6.54%), 16 Oct 2008 (-6.74%), 28 Oct 2008 (-8.08%), 26 Nov 2008 (19.52%)
2007112 Mar 2007 (12.59%)
2006201 Jun 2006 (-6.23%), 15 Jun 2006 (21.09%)
2004129 Mar 2004 (15.9%)
2001621 Feb 2001 (-3.66%), 28 Feb 2001 (-4.38%), 09 Mar 2001 (-5.46%), 12 Mar 2001 (-6.04%), 02 May 2001 (-4.4%), 28 Jun 2001 (-3.69%)
2000513 Mar 2000 (-7.81%), 01 Aug 2000 (-4.93%), 17 Aug 2000 (-4.44%), 26 Sep 2000 (-3.08%), 17 Oct 2000 (-2.65%)
1997122 Dec 1997 (7.63%)
1996103 Oct 1996 (-1.84%)



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