Bank Nifty: System Testing Trend Defining Line

Last month I wrote about a simple concept of buying and selling based on a buying and selling on cross of a simple trend line. Post here.

Then I tested the Nifty daily data of last 15 years and the system was outperforming the buy and hold. Post here.

Today I am testing the same concept for Bank Nifty on weekly charts. The main reason I am testing on weekly instead of daily charts is that the Bank Nifty being a high beta index has more whipsaws on daily charts and the test conditions being very simple it generates a lot of trades some even by just 2 points lower close.

Also there are always different system performing well on different timeframes and we should always trade them in that very timeframe for maximum advantage.

Please see this post as an endeavor to quantifying some technical strategies and then optimize them for better trading results.

Lets look at the results:

Buy & Hold out performance: 54%
Profit Factor (Profit/ Loss):      5.3
Absolute Drawdown:              513 points

Time frame: Daily for last 10 years on Bank Nifty spot.

Buy Condition: Close above the TDL.
Sell Condition: Close below TDL

Short Condition: Close below TDL
Profit Book Condition:  Close above the TDL.

Commissions: 0.10% of trade.
Trade Entry: Buy/Sell on next open bar i.e. if signal is generated before today's close then buy/sell tomorrow open. This is to have a realistic results and avoids preempting the signal though we loose a lot by waiting for next candle.

As can be seen these are very simple rules to trade.

Output

Equity curve is attached.

* CNX BANK INDEX (70001968) Simulation Date 20/01/2011 12:17:04 PM 577 Weekly Bars 07/01/2000 Through 19/01/2011 (4030 Days) Points Only Test

Performance Profit 14724.5876 Pts Performance N/A Annualized Performance N/A Buy & Hold Profit 9559.2855 Pts Buy & Hold Performance N/A Buy & Hold Annualized Performance N/A Trade Summary Total Trades 31 Trade Efficiency -3.59 % Average Profit/Average Loss N/A Profitable Trades Total 15 Long 10 Short 5 Average Profit 1206.4348 Pts Highest Profit 3907.3321 Pts Lowest Profit 32.2313 Pts Most Consecutive 2 Unprofitable Trades Total 16 Long 5 Short 11 Average Loss -210.7459 Pts Highest Loss -830.6802 Pts Lowest Loss -25.8716 Pts Most Consecutive 5 Maximum Position Excursions Long Favorable 5257.9317 Pts Short Favorable 4073.1338 Pts Long Adverse -931.1746 Pts Short Adverse -958.5298 Pts Trade Efficiency Average Entry 60.11 % Average Exit 36.30 % Average Total -3.59 % Average Long Entry 71.38 % Average Long Exit 42.19 % Average Long Total 13.57 % Average Short Entry 49.54 % Average Short Exit 30.78 % Average Short Total -19.69 %

Performance Indices Buy & Hold Index 54.03 % Profit/Loss Index 81.37 % Reward/Risk Index 96.63 % Accounting Initial Equity 0.0000 Pts Trade Profit 18096.5213 Pts Trade Loss -3371.9338 Pts Commissions 115.0702 Pts Interest Credited 0.0000 Pts Interest Charged 0.0000 Pts Final Equity 14724.5876 Pts Open Positions 0.0000 Pts Account Variation Highest Account Balance 15565.2663 Pts Lowest Account Balance -513.0161 Pts Highest Portfolio Value 5257.9317 Pts Highest Open Drawdown -513.0161 Pts Highest Closed Drawdown -461.0274 Pts Account Events Margin Calls 0 Overdrafts 0 Profitable Timing Average Trade Length 30 Longest Trade Length 76 Shortest Trade Length 5 Total Trade Length 451 Unprofitable Timing Average Trade Length 6 Longest Trade Length 21 Shortest Trade Length 1 Total Trade Length 104 Out of Market Timing Average 7 Longest 21 Total 22