Testing Price-Volume, Pair Mean-Reversion, and RSI Strategies on Indian Stocks

Summary

This project studies daily price and volume data for 20 Indian equities selected from sector indices, using observations from October 2010 through December 2018 and a short out-of-sample period in early 2019. It tests three approaches: a short signal based on price and volume falling below recent averages, a sector pair strategy using a cointegration check and spread bands, and an RSI strategy that trades overbought or oversold readings. The author compares trade outcomes with measures including hit ratio, returns, drawdown, and Sharpe ratio, and reports that performance varies across stocks rather than one method working universally.

The reported backtests show positive average results for the price-volume short strategy, but transaction costs are excluded, and the out-of-sample window is brief. The article gives implementation rules and selected parameter choices, but the results are tied to a limited, screened sample; selecting stocks partly by past return and volatility may also affect interpretation. The evidence is therefore exploratory and does not establish that the strategies would remain profitable in live trading.

Key ideas

• The project tests price-volume short selling, pair mean reversion, and RSI based trend signals on a selected sample of Indian equities.
• The pair strategy checks for cointegration before trading deviations in a price ratio around rolling bands.
• The project reports that strategy performance differs across stocks rather than finding one approach that works for all.
• Reported returns exclude transaction costs, which can materially affect frequent trading strategies.
• The short out-of-sample period and screened stock selection limit how broadly the results can be generalized.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.