Study: Buy TATAPOWER 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 TATAPOWER 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 TATAPOWER 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
1-8442.46167943.754234.78921.93-4231.71-13833.4110.78-0.019-527.65
2-6672.73167943.755076.3711102.66-4689.71-11105.71.080.84-0.014-417.05
3-32150.211688504556.838193.28-8575.61-13312.690.530.53-0.055-2009.39
4-23056.29169756.254758.3811136.54-9411.67-26022.30.510.65-0.031-1441.02
5-17619.63167943.757443.0920743.03-7746.81-30483.270.960.75-0.021-1101.23
68633.831688507577.0226006.19-6497.79-18091.71.171.170.011539.61
78887.781610662.57438.3322291.02-10915.92-36926.890.681.140.0088555.49
851242.631611568.759290.4324159.66-10190.41-29491.950.912.010.0543202.66
943314.59169756.2511194.5533613.45-8205.19-26517.971.361.750.0422707.16
1057061.931610662.510568.2732773.11-8103.47-25526.641.32.170.0583566.37
Although, strategy looks good but profit factor on day 3 is less than minimum accepted value so avoid this, see below for further analysis.
TATAPOWER Performance, X=10, Profit Factor:2.17

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2020212 Mar 2020 (-12.76%), 30 Mar 2020 (6.5%)
2019111 Feb 2019 (1.53%)
2015101 Sep 2015 (1.91%)
2011224 Aug 2011 (-3.49%), 13 Sep 2011 (3.23%)
2010115 Feb 2010 (2.82%)
2002108 Aug 2002 (2.71%)
2001214 Sep 2001 (-2.24%), 05 Oct 2001 (16.39%)
2000204 May 2000 (7.72%), 10 Oct 2000 (-1.53%)
1999215 Feb 1999 (-1.53%), 16 Mar 1999 (2.66%)
1997216 Sep 1997 (7.38%), 12 Nov 1997 (-2.75%)

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
atrnil31024353.262161528.5730251.8543616.43-10477.19-21059.332.891.150.0121159.68
atrtrail25.32-14601.52257182814276.2337446.87-6363.06-14901.742.240.87-0.0099-584.06
atrnil28.67-36150.432161528.5720167.929077.62-10477.19-21059.331.920.77-0.024-1721.45
atrtrail35.6-53705.3425718288689.9729006.11-6363.06-14901.741.370.53-0.048-2148.21
atrtrail-15.84-59637.7125718287842.4923073.73-6363.06-14901.741.230.48-0.058-2385.51

In the table above, row 1 shows the best exit criterion. Profit factor is 1.15. 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 28.57%, which is not acceptable. Avoid this strategy. Average return per trade is 0.58%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.012, 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.
TATAPOWER Performance, Profit Factor:1.15

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2020412 Mar 2020 (-6.59%), 16 Mar 2020 (-7.45%), 18 Mar 2020 (-9.24%), 23 Mar 2020 (-10.53%)
2019111 Feb 2019 (11.54%)
2015101 Sep 2015 (-4.09%)
2011224 Aug 2011 (-3.79%), 05 Sep 2011 (-4.05%)
2010115 Feb 2010 (-3.32%)
2002108 Aug 2002 (-3.86%)
2001214 Sep 2001 (-4.89%), 18 Sep 2001 (16.4%)
2000304 May 2000 (21.81%), 10 Oct 2000 (-4.68%), 16 Oct 2000 (14.79%)
1999315 Feb 1999 (-4.34%), 23 Feb 1999 (-4.62%), 16 Mar 1999 (14.3%)
1997316 Sep 1997 (-3.06%), 12 Nov 1997 (-4.08%), 24 Nov 1997 (11.91%)



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