The effectiveness of technical trading strategies: Evidence from Indian equity markets

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The purpose of the study was to analyze the effectiveness of technical trading strategies in trading stocks of selected Indian companies represented in the Nifty 50 Index. The research was done using secondary data from January 2022 to August 2022. Hourly share prices of 14 largest companies as per market capitalization from 14 different sectors from the Nifty 50 Index were considered as a part of the study. Simple Moving Average, Exponential Moving Average – Relative Strength Index and Bollinger Bands – Relative Strength Index – strategies considered in the study. It was found that strategy based on Bollinger Bands and Relative Strength Index performed the best. Performance was considered with respect to both the number of stocks having a net profit and the number of stocks that were able to outperform the buy-and-hold strategy for the time period considered. The study considered several combined strategies and performance indicators, whereas previous studies used limited indicators. Out of the 14 stocks considered, the Simple Moving Average strategy was able to generate net profit for 8 stocks and it outperformed the buy-and-hold strategy for 6 stocks, Exponential Moving Average – Relative Strength Index strategy generated net profit for 6 stocks and it outperformed the buy-and-hold strategy for 5 stocks, and the Bollinger Bands – Relative Strength Index generated net profit for 11 stocks and it outperformed the buy-and-hold strategy for 10 stocks. The Bollinger Bands – Relative Strength Index strategy was able to outperform as it was more dynamic and entered and exited positions actively.

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    • Figure 1. Flowchart depicting the framework for implementing a trading strategy
    • Figure 2. SMA Crossover Strategy applied on Maruti Suzuki Ltd.
    • Figure 3. EMA & RSI Strategy applied on Adani Ports & SEZ Ltd.
    • Figure 4. Bollinger Bands & RSI Strategy applied on Asian Paints Ltd.
    • Table A1. List of companies considered for the study
    • Table A2. SMA Crossover Strategy results
    • Table A3. EMA and RSI Strategy results
    • Table A4. Bollinger Bands and RSI Strategy results
    • Conceptualization
      Harikrishna Tadas, Jeevan Nagarkar, Sushant Malik
    • Data curation
      Harikrishna Tadas
    • Formal Analysis
      Harikrishna Tadas, Sushant Malik, Dharmesh K. Mishra
    • Methodology
      Harikrishna Tadas, Jeevan Nagarkar, Sushant Malik, Dharmesh K. Mishra, Dipen Paul
    • Software
      Harikrishna Tadas, Sushant Malik, Dipen Paul
    • Writing – original draft
      Harikrishna Tadas, Jeevan Nagarkar, Sushant Malik
    • Investigation
      Jeevan Nagarkar, Dharmesh K. Mishra, Dipen Paul
    • Supervision
      Jeevan Nagarkar, Sushant Malik, Dharmesh K. Mishra, Dipen Paul
    • Writing – review & editing
      Sushant Malik, Dharmesh K. Mishra, Dipen Paul
    • Validation
      Dharmesh K. Mishra, Dipen Paul