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How to Master Backtesting on AlgoTest

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The 920 Straddle Strategy Defined​

The 920 Straddle on AlgoTest is a popular intraday options trading strategy activated around 9:20 AM.
It involves simultaneously buying or selling an At-The-Money (ATM) call and put option of the same underlying asset with the same expiration. This approach capitalizes on significant market moves in either direction post the market opening volatility.

Requirements for backtesting on AlgoTest​

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The following things are required for backtesting on AlgoTest :

  1. An AlgoTest account
  2. A strategy

Creating & Backtesting a 920 Straddle Strategy​

Backtesting is the cornerstone of strategy validation. It assesses the viability of a trading strategy by simulating its performance using historical data. This evaluation helps traders gauge potential profitability and risk.

Steps to Create & Backtest a Strategy in Algotest​

What we are going to do now is create a famous 920 short straddle strategy with 25% SL in Algotest. To create a strategy for Algotest, we will follow a simple set of steps. Here is a general guide:

  • Create an account at https://algotest.in.

  • You will get 25 free backtests every week.

  • To Create a strategy, first Click on Create Strategy on the AlgoTest dashboard as shown in the image below.

  • It will open a new strategy creation page as shown in the image below

Strategy Type:- Intraday/BTST/Positional:-
We have the option if we want to create an Intraday strategy or positional.
Entry Time:- The time at which we want to enter our strategy.
Exit Time:- The time at which we want to exit our positions.
Select Index:- Here we can select the instrument ( For example nifty/bank nifty/Sensex etc)
Underlying from:- Cash/futures:-
If we select cash it means our strikes will be selected based on index spot price or futures price.

  • According to our Strategy, we are going to enter---

Strategy Type:- Intraday
Entry Time:- 9:20
Exit Time:- 3:10
Index:- Nifty
Underlying:- Cash

  • Set up these as shown in the image below

  • Let me explain some more features of :Leg Builder you should know about to create this strategy.

Select Segments:- You can select segments between Options & Futures

Total lot:- Enter the Quantity

Position:- Can select if you want to buy an option/futures or sell an option/futures

Option Type:- Can select between Call or Put options.

Expiry:- Option to select if you want to trade this week's expiry/ next week's expiry/ monthly expiry.

Select Strike Criteria:- Different Methods to select a strike

Adding a leg in your strategy​

Now we have to add a call leg from the leg builder. So, according to our Strategy, we are going to enter :

Select Segments:- Options ( Because we want to trade in options).

Total Lot:- 1 (Quantity we want to test with 1 lot).

Position:- Sell (We are Selling a Straddle here.)

Option Typing:- Call (First we add a Call leg then in the next step we will add a Put leg).

Expiry:- Weekly (We want to trade only in the current week's expiry).

Select Strike Criteria:- :Strike Type -- ATM (We want to sell ATM Call)

  • Set up the above settings as shown in the image below.

  • After setting up the condition as shown in the above image, click on Add Leg. It will show you the interface as shown in the below image.

  • In the above settings, we have added a sell ATM Call leg from leg builder. Now we are going to add a Sell ATM Put Leg from Leg Builder. So enter the below settings in Leg Builder & click on add leg.

Select Segments:- Options ( Because we want to trade in options).

Total Lot:- 1 (Quantity we want to test with 1 lot)

Position:- Sell (We are Selling Call & Put so selecting Sell here).

Option Typing:- Put (Want to Add Put Leg Now).

Expiry:- Weekly (We want to trade only in the current week's expiry).

Select Strike Criteria:- Strike Type -- ATM ( We want to Sell Straddle so selected ATM).

  • After Clicking on Add leg, it will show you the interface as shown in the image below.

  • Now we are going to set a stop-loss for both of these legs. For this, click on the stop loss icon as marked in the image below, and select Percentage. Then, Enter 25 in the percentage field as shown in the below image.

  • So now we can save our strategy. Click on the save button on the bottom right & save this strategy with any name(for example 920 straddle) you like. Now to Backtest this strategy select the time for which you want to backtest and click on backtest as shown in the image below.

  • It will show you the backtest results and stats of this strategy as shown in the image below. To know how to interpret these stats please click here.

In order to learn about forward testing, please go to the :forward testing section.

In order to learn about live trading on AlgoTest, :please consult the live trade section.

Conclusion​

AlgoTest goes beyond being a mere platform. It is a trading mate for you in every phase of the 920 Straddle trading strategy so it is unquestionably robust and suitable for use in real trading. Because AlgoTest traders have complete reliance to navigate the trading environment, their winning strategies are thoroughly tested, proven to be reliable, and are specifically designed for success.