Correct me if I'm wrong but wouldn't this strategy have bene short through this fall? It's a remarkable strategy - and would have likely made over 600 points.
I think the 500 point stop is too narrow for it. I would put a higher stop on it. How to calculate stops? It's usually a function of how much you allocate to it per lot. One lot of nifty exposes you to Rs. 2 lakhs (at 4000 nifty). typical margins required by brokers are only 20K, but you should allocate more for things like drawdowns. Assume you have 2x leverage, you should allocate Rs. 100,000 (One lakh) per lot.
The total money earned then, for one lot, is 1600 x 50 = 80K. That's an 80% return. Max drawdown is, let's say, was 600 points. That is 30K. You get 80K return for 30K risk, which is a "bliss" factor of 2.66. Typical blisses of even 1.5 are considered good.
But this means you have to increase the drawdown risk - I would say keep it at 800 points. that gives you a 2x bliss. And if you back test it further you can find out if 800 points would have been violated too.
Further you can do position sizing and manage risk. Position sizing is applicable at higher money levels. Say you have 10 lakhs. You would initially take 10 lots. Then let's say you have a 200 point drawdown. You will then have lost Rs. 1 lakh, so now you will take on only 9 lots. The subsequent 200 points you lose on 90,000, then you take on 8 lots, etc. That way you keep reducing exposure naturally on a drawdown, and increase when you scale up.
A system will consist not just of entries and exits, but a comprehensive back test, a reasonable position sizing method, and a way to keep the system parameters stable (retesting).
When you do this, a 100 point stop and reverse is not big. For a 1 lakh allocation, a 100 point stop loss is Rs. 5000 - a 5% stop loss. Which looks much smaller than if you think of a 20 k margin per lot (there it looks like 25% stop loss!)
Perhaps this system should not be tried without 1 lakh capital because then it becomes too risky. But overall it's looking quite good - I hope you continue.