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Analysing a strategy

Real-Time Analysis of Strategy

The AlgoTest simulator allows traders and analysts to analyse historical data in real-time, providing a powerful tool for refining and validating trading strategies. This feature enables users to backtest their options strategies against historical market data and receive immediate feedback on performance metrics. By simulating trades with past data in real-time, users can observe how their strategies would have performed under different market conditions, gaining insights into potential strengths and weaknesses. This real-time analysis of historical data helps in identifying patterns, testing hypotheses, and understanding the impact of various market scenarios on trading outcomes. Moreover, it enables traders to optimise their strategies before deploying them in live markets, thereby reducing risk and increasing confidence. The ability to analyse historical data in real-time within the AlgoTest simulator ultimately enhances the precision and effectiveness of trading decisions, bridging the gap between theoretical analysis and practical application. When you apply a strategy in the simulator you will be able to view and analyse your strategy as per the tools given in the analysis section as shown in the image below.

By running the simulation and advancing it by 1 hour, you can observe the real-time simulation and analysis of the strategy, as depicted in the image below. These tools allow you to refine your strategy based on current market conditions. For instance, if we notice that our MTM reaches 70 at 10:20, we can make adjustments to our strategy accordingly.

We get detailed insights such as Total MTM, Maximum Profit, Maximum Loss, Breakeven, etc. during real-time simulations. These insights help us fine-tune our strategy according to market trends and develop a robust strategy that aligns with market conditions.

We also receive visualizations of insights that provide information on how our MTM (mark to market) will perform based on the underlying movement and how much we stand to gain or lose if the underlying asset expires at a specific price. In simple terms, it gives us a clear understanding of how our MTM will move in response to changes in the underlying asset.

In the Greeks section, you can view the Greeks while simulating your strategy in real-time. Greeks are important metrics that help you understand how option pricing will move according to market conditions. Using these Greek values while simulating a strategy will give you an edge over other traders.

Trade Management/Adjustments

AlgoTest Simulator offers advanced features that help you manage your position and make real-time adjustments during simulations. These features provide you with high flexibility in customising your strategy to match the market scenario and create a robust approach according to your preferences.

To manage your position in real-time during simulation, simply click on the position tab as indicated in the image below.

Square off

You can close any position by clicking on the square-off button also shown in the image below. This feature allows you to lock in profits or cut losses within your strategy, helping you create a robust plan that can adapt to market conditions.

You can also reverse the decision to square off a leg by clicking on the undo button, as shown in the image below. This option will be helpful if you want to reconsider the decision to square off any of the legs.

Add a Leg

When conducting a simulation, adjusting an existing position and adding a new one with a different strike is a common practice for many option traders. In the AlgoTest Simulator, you can easily accomplish this with just a few clicks. Simply navigate to the option chain, select the leg, and then choose the new position as shown in the accompanying image.

Leg will be added and you will be able to see that the new leg has been added to the strategy.

Custom Prices

You have the option to adjust the entry and exit prices for any of the positions by clicking on the "trades" button and entering the desired price, as shown in the image below. This feature allows you to manually modify the entry price according to your preferences, enabling you to design your strategy based on actual market conditions. For instance, you can incorporate some slippage into the available price to reflect real-life scenarios.

Similarly, you can enter the custom exit price of a squared off leg as shown in the image below.

Custom Quantity

Customising lot sizes during a simulation is very helpful. If you run a simulation and later want to see the impact of trading with a quantity that is different from the original, adjusting the lot size can help you fine-tune your strategies for different position sizes.

Custom Position Type

You can easily switch the position type from buy to sell or sell to buy with just a single click, as demonstrated in the image below.

Enable/Disable a Position

You have the option to enable or disable a toggle to temporarily add or remove a running position from the strategy. This feature helps you fine-tune your strategy during real-time simulation according to your personal preferences. For example, if you are testing a strategy with multiple legs and realise during simulation that the strategy may perform better without certain legs, you can disable them and see how the strategy performs without those legs.