Study: Buy TECHM when there is bullish divergence in RSI

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In this study, we evaluate the performance of strategy "Buy TECHM 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 TECHM 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
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

In the table above, row 1 shows the best exit criterion. Profit factor is 1.19. 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 29.17%, which is not acceptable. Avoid this strategy. Average return per trade is 0.79%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.018, which is low, don't trade solely on the basis of this study. Average holding period is on the higher side, note this before entering the trade that you you may need to hold the positions for a longer time.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
TECHM Performance, Profit Factor:1.19

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2020311 Mar 2020 (-3.55%), 20 Mar 2020 (-7.3%), 24 Mar 2020 (27.75%)
2019125 Jul 2019 (-2.55%)
2016317 Feb 2016 (-3.32%), 25 Feb 2016 (9.82%), 07 Oct 2016 (-2.57%)
2015107 Jul 2015 (10.64%)
2013123 Apr 2013 (10.16%)
2010610 May 2010 (-3.28%), 14 May 2010 (-3.51%), 18 May 2010 (-3.59%), 19 May 2010 (-4.01%), 21 May 2010 (-4.26%), 28 May 2010 (12.8%)
2008629 Jan 2008 (-9.51%), 31 Jan 2008 (-9.84%), 06 Oct 2008 (-6.65%), 20 Oct 2008 (-12.74%), 24 Oct 2008 (-14.47%), 01 Dec 2008 (34.76%)
2007310 Aug 2007 (-4.33%), 27 Aug 2007 (14.77%), 15 Nov 2007 (-6.21%)

View performance of other stocks for this trading system.

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