Do simple Trading strategies really work in Indian Markets? It is the curiosity remains among most of the traders. Does a simple technical condition bring consistent returns in the markets despite commissions and slippages?
To test this hypothesis, we took a strategy which is quite popular in social media – VWAP based intraday trading strategy. Here are the rules
VWAP is a simple day trading strategy where we use previous day’s end of day (EOD) VWAP and current day VWAP
When an instrument is trading above previous day closing VWAP, it is bullish and if it is trading below, it is bearish
Nifty Futures – VWAP Intraday Trading Strategy ( 15min Timeframe)
Chart time frame: 15 minutes
Buy entry: When instrument crosses high of Bullish 15 min candle which touched and closed above current day VWAP
Sell entry: When instrument crosses Below Low of Bearish 15 min candle which touched and closed below current day VWAP
Target: 30 Points for Nifty, 90 Points for Bank Nifty and 1.5 % stocks
SL: 20 Points for Nifty, 60 Points for Bank Nifty and 1 % stocks
We tested the trading strategy in Nifty Futures and Bank Nifty Futures right from Jan 2011 to Dec 2019. Here are the backtest results.
VWAP Based Intraday Strategy – Amibroker AFL code
Visually strategy looks good but backtesting failed to produce impressive results. When comes to Nifty futures strategy is profitable before including reasonable trading commissions and slippages but failed to turn profitable post adding trading commissions and slippages. When comes to Banknifty futures strategy is not profitable even before including the trading cost.