Study: Sell TVSMOTOR when there is bearish divergence in RSI

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In this study, we evaluate the performance of strategy "Sell TVSMOTOR when there is bearish divergence in RSI" under various conditions.

X Analysis

In the table below, we find out the performance of this trading strategy under following scenario: sell TVSMOTOR 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. buy 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
120197.85352114605291.6813848.47-6494.81-17307.690.811.220.019577.08
2-8935.2435191654.295392.0415157.89-6961.5-20054.950.770.92-0.0077-255.29
3-33361.0735132237.148141.717218.54-6327.42-27541.211.290.76-0.024-953.17
4-67932.4335152042.868047.1520992.48-9431.99-43965.520.850.64-0.035-1940.93
5-10627635171848.577790.317436.65-13261.76-37225.270.590.55-0.053-3036.47
6-11622035161945.717435.421754.64-12378.26-32074.180.60.51-0.061-3320.59
7-14488935132237.149760.521192.05-12353.41-32640.950.790.47-0.073-4139.67
8-15662935122334.2911880.3122666.23-13008.37-42215.630.910.48-0.071-4475.11
9-20338035122334.2911935.8423123.93-15070-45657.760.790.41-0.083-5810.86
10-25955335132237.1410610.830114.89-18067.89-42888.230.590.35-0.095-7415.8

From the table above, we see that best results are achieved by holding positions for 1 trading days. Profit factor is 1.22. 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 60%, which is not acceptable. Avoid this strategy. Average return per trade is 0.29%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.019, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability. Win loss ratio is less than 1 which is bad, avoid 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-1120197.85352114605291.6813848.47-6494.81-17307.690.811.220.019577.08
atrtrail23.25-14092.0555183732.7312359.9124092.6-6393.8-17838.361.930.94-0.0058-256.22
atrnil24.13-90241.3853153828.316420.1424092.6-8856.41-17838.361.850.73-0.033-1702.67
atrtrail34.11-13315955154027.278099.630039.91-6366.34-17838.361.270.48-0.067-2421.08
atrtrail-14.27-13763455154027.277801.3322754.41-6366.34-17838.361.230.46-0.072-2502.43
atrnil36.4-2314895374613.2124450.6230039.91-8753.11-17838.362.790.43-0.086-4367.71

In the table above, row 1 shows the best exit criterion. Profit factor is 1.22. 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 60%, which is not acceptable. Avoid this strategy. Average return per trade is 0.29%, which is not very high, don't trade solely on the basis of this study. Sharpe Ratio is 0.019, which is low, don't trade solely on the basis of this study. Maximum losing trade is greater than maximum winning trade which is not good and there can be a huge drawdown before profitability. Win loss ratio is less than 1 which is bad, avoid this strategy.
In the chart below, we plot cumulative trade gain versus trades using the best exit criterion.
TVSMOTOR Performance, X=1, Profit Factor:1.22

Yearwise Summary of trades in above chart

YearNumber of TradesTrade Dates
2017418 Apr 2017 (-0.13%), 03 May 2017 (0.09%), 22 May 2017 (0.6%), 26 Oct 2017 (0.84%)
2016301 Apr 2016 (0.06%), 13 Oct 2016 (-1.4%), 30 Oct 2016 (1.31%)
2015204 Nov 2015 (1.58%), 27 Nov 2015 (-0.56%)
2014415 May 2014 (2.55%), 29 May 2014 (4.27%), 07 Jul 2014 (5.29%), 12 Sep 2014 (2.65%)
2013214 Oct 2013 (4.25%), 31 Dec 2013 (3.42%)
2012105 Oct 2012 (1.99%)
2010311 Jan 2010 (-2.12%), 06 May 2010 (6.92%), 29 Jul 2010 (-1.94%)
2009204 May 2009 (-0.43%), 19 May 2009 (-4.32%)
2006230 Jan 2006 (-5.89%), 16 Feb 2006 (1.26%)
2005121 Sep 2005 (4.0%)
2003523 May 2003 (-3.88%), 13 Aug 2003 (2.38%), 02 Sep 2003 (-2.01%), 17 Sep 2003 (3.46%), 20 Oct 2003 (2.77%)
2002428 Jan 2002 (-6.27%), 11 Feb 2002 (3.03%), 12 Jul 2002 (2.84%), 04 Dec 2002 (-3.67%)
2001202 Nov 2001 (-4.18%), 23 Nov 2001 (-8.65%)



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