Study: Buy STAR when there is bullish divergence in RSI and ADX is Trending

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

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: buy STAR 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
16921.441596604472.4223547.07-5555.05-15526.320.811.210.014461.43
251584.03158753.3310563.5737100.58-4703.5-14260.832.252.570.0723438.94
39014.77158753.3313577.3736308.54-14229.17-46864.490.951.090.0076600.98
4-28378.06157846.6715143.3535816.8-16797.69-65084.080.90.79-0.019-1891.87
54732.53158753.3316168.136159.87-17801.76-44886.250.911.040.0035315.5
619842.25158753.3316794.0641523.24-16358.61-40474.781.031.170.0141322.82
7-13392.0714775017363.8144450.8-19276.96-43877.550.90.9-0.0096-956.58
8-5594.62146842.8620001.835599.4-15700.68-36734.691.270.96-0.0044-399.62
911174.71146842.8624401.4244177.57-16904.22-32502.471.441.080.008798.19
1038745.8146842.8625378.9752326.83-14191-34460.931.791.340.0282767.56
Although, strategy looks good but profit factor on day 1 is less than minimum accepted value so avoid this, see below for further analysis.
STAR Performance, X=2, Profit Factor:2.57

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019107 Oct 2019 (2.49%)
2018215 May 2018 (-0.48%), 31 May 2018 (-7.13%)
2017115 Nov 2017 (3.27%)
2016226 Feb 2016 (6.59%), 30 Aug 2016 (-1.17%)
2014313 Jan 2014 (3.03%), 28 Jan 2014 (0.03%), 11 Feb 2014 (-0.97%)
2013130 Dec 2013 (-0.66%)
2008101 Feb 2008 (5.23%)
2007109 Aug 2007 (-2.1%)
2006108 Jun 2006 (18.55%)
2001216 Mar 2001 (3.06%), 04 May 2001 (-3.95%)

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
atrnil311.81-1207.481651131.2533950.7658323.28-15541.93-30981.272.180.99-0.00072-75.47
atrtrail25.68-6928.651971236.8414627.1238882.19-9109.87-16080.051.610.94-0.0061-364.67
atrnil28-11508.871661037.524004.1138882.19-15553.35-30981.271.540.93-0.0083-719.3
atrtrail36.58-13321.571971236.8413713.8438257.76-9109.87-16080.051.510.88-0.012-701.14
atrtrail-17.42-25959.741971236.8411908.3930939.39-9109.87-16080.051.310.76-0.027-1366.3

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 31.25%, which is not acceptable. Avoid this strategy. Average return per trade is -0.038%, we advise you not to use this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
STAR Performance, Profit Factor:0.993

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2019107 Oct 2019 (-5.12%)
2018215 May 2018 (-4.99%), 22 May 2018 (-9.15%)
2017115 Nov 2017 (10.78%)
2016226 Feb 2016 (19.13%), 30 Aug 2016 (10.62%)
2013130 Dec 2013 (-13.49%)
2008101 Feb 2008 (-15.49%)
2007309 Aug 2007 (-4.53%), 10 Aug 2007 (-4.86%), 22 Aug 2007 (15.18%)
2006108 Jun 2006 (29.16%)
2001416 Mar 2001 (-6.24%), 04 May 2001 (-6.62%), 07 May 2001 (-7.27%), 10 May 2001 (-7.71%)



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