Study: Buy RCOM when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy RCOM 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 RCOM 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
1-2003.56178947.06515619664.47-4805.73-13071.111.070.95-0.0049-117.86
2-12468.09178947.064901.9510013.91-5742.63-16693.940.850.76-0.03-733.42
3-73212.541741323.536731.7611309.52-7703.04-30441.90.870.27-0.12-4306.62
4-66230.421761135.2910573.7119112.34-11788.43-30114.570.90.49-0.082-3895.91
5-69039.85179852.946618.7813444.38-16076.11-31423.90.410.46-0.085-4061.17
6-119240178947.067664.6614966.68-20061.91-65793.780.380.34-0.1-7014.11
7-171441179852.946765.0513492.06-29040.76-69067.10.230.26-0.13-10084.74
8-2004141761135.2910225.0116865.08-23796.75-69721.770.430.23-0.14-11789.07
9-1197381761135.2911376.7118253.97-17090.73-64157.120.670.36-0.1-7043.4
10-1596891741323.5313996.1220820.94-16590.29-64811.780.840.26-0.13-9393.49

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 0.95. 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 47.06%, which is not acceptable. Avoid this strategy. Average return per trade is -0.059%, we advise you not to use 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-11-2003.56178947.06515619664.47-4805.73-13071.111.070.95-0.0049-117.86
atrtrail25.21-105977246182516161.3633518.03-11274.73-34335.341.430.48-0.083-4415.71
atrnil313.39-1762982332013.0442403.3450277.04-15175.42-34335.342.790.42-0.11-7665.15
atrnil211.13-1743512341917.3928593.4233518.03-15196.05-34335.341.880.4-0.12-7580.49
atrtrail35.58-15397824618258161.221881.77-11274.73-34335.340.720.24-0.16-6415.75
atrtrail-15.58-15397824618258161.221881.77-11274.73-34335.340.720.24-0.16-6415.75

In the table above, row 1 shows the best exit criterion. Profit factor is 0.95. 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 47.06%, which is not acceptable. Avoid this strategy. Average return per trade is -0.059%, we advise you not to use this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
RCOM Performance, X=1, Profit Factor:0.954

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2018204 May 2018 (1.3%), 05 Oct 2018 (-3.49%)
2017219 May 2017 (-2.45%), 05 Jun 2017 (-3.13%)
2016305 Feb 2016 (-1.39%), 19 Feb 2016 (0.79%), 28 Nov 2016 (1.67%)
2015109 Jan 2015 (1.23%)
2014226 Sep 2014 (2.2%), 26 Dec 2014 (0.31%)
2012122 May 2012 (-1.79%)
2011115 Feb 2011 (-1.92%)
2010101 Dec 2010 (3.28%)
2009205 Nov 2009 (-0.03%), 26 Nov 2009 (-0.89%)
2008202 Jul 2008 (-6.54%), 15 Oct 2008 (9.83%)



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