Study: Buy NMDC when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy NMDC 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 NMDC 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
112560.731610662.54069.5810026.04-4689.19-13376.190.871.450.041785.05
26635.861688506026.7918489.58-5197.31-17018.671.161.160.015414.74
3-19849.311688504101.379548.61-6582.54-25436.180.620.62-0.045-1240.58
417580.191688507670.5517795.14-5473.02-19712.271.41.40.0381098.76
568895.231613381.258540.4439297.55-14043.48-19773.490.612.640.14305.95
666584.7716124759306.9845791.92-11274.75-19191.920.832.480.0874161.55
729106.6616885011478.8134393.64-7840.48-21154.831.461.460.0421819.17
814974.3616885011433.3929290.92-9561.6-26724.581.21.20.021935.9
91729.6216885010113.5121063.94-9897.31-23147.681.021.020.0028108.1
10-24047.73169756.257926.8217171.05-13627.01-30812.470.580.75-0.034-1502.98
Although, strategy looks good but profit factor on day 3 is less than minimum accepted value so avoid this, see below for further analysis.
NMDC Performance, X=5, Profit Factor:2.64

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019128 Aug 2019 (0.06%)
2018105 Dec 2018 (2.29%)
2017105 Jun 2017 (1.78%)
2015206 Aug 2015 (-5.46%), 21 Aug 2015 (7.47%)
2014110 Oct 2014 (5.07%)
2013212 Feb 2013 (4.31%), 21 Jun 2013 (0.33%)
2012110 Dec 2012 (5.49%)
2011125 Nov 2011 (1.36%)
2010323 Mar 2010 (-9.89%), 13 Apr 2010 (2.09%), 08 Jun 2010 (2.16%)
2008308 Jul 2008 (3.45%), 07 Oct 2008 (-5.72%), 03 Nov 2008 (19.65%)

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
atrtrail-15.8450199.61258173221695.02105469-7256.5-15433.242.991.410.0252007.98
atrnil313.4343679.392361726.0932762.1848988.5-8993.74-15808.843.641.290.0291899.1
atrnil29.716029.712381534.7819537.3132659-9351.25-15808.842.091.110.014696.94
atrtrail35.413107.04258173217058.4547664.13-7256.5-15433.242.351.110.0099524.28
atrtrail25-11123.59258173214029.6231776.09-7256.5-15433.241.930.91-0.011-444.94

In the table above, row 1 shows the best exit criterion. Profit factor is 1.41. 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 32%, which is not acceptable. Avoid this strategy. Average return per trade is 1%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.025, 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.
NMDC Performance, Profit Factor:1.41

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019128 Aug 2019 (1.59%)
2018205 Dec 2018 (-3.08%), 11 Dec 2018 (3.77%)
2017105 Jun 2017 (-0.26%)
2015606 Aug 2015 (-0.72%), 12 Aug 2015 (-2.67%), 13 Aug 2015 (-2.85%), 17 Aug 2015 (-3.08%), 18 Aug 2015 (-2.7%), 21 Aug 2015 (-3.11%)
2014110 Oct 2014 (9.11%)
2013312 Feb 2013 (-2.53%), 13 Feb 2013 (2.0%), 21 Jun 2013 (-3.48%)
2012110 Dec 2012 (-0.85%)
2011125 Nov 2011 (-3.34%)
2010323 Mar 2010 (-7.4%), 26 Mar 2010 (-2.96%), 08 Jun 2010 (2.03%)
2008608 Jul 2008 (1.5%), 16 Jul 2008 (52.73%), 07 Oct 2008 (-7.62%), 16 Oct 2008 (-7.31%), 21 Oct 2008 (-7.72%), 03 Nov 2008 (14.05%)



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