How to Analyse Strategies Deployed in AlgoTest or TradeRadar?

Merely applying the trading strategy in the Algo trading software is not enough you need to analyse various factors that are responsible for the execution and success in the market. Analysing the strategy will help you know how much profit you can earn from this strategy and how much risk or loss you can incur.

Similarly, there are various other things you can know when you perform the strategy analysis helping you to optimize the strategy for better results. In AlgoTest or TradeRadar like Algo trading software, you can perform the analysis on the strategy you deployed in the system for trading. Before we discuss how to analyse the strategy, let us discuss a little bit about why strategy analysis is important.

Also Read: Why Choose Algorithmic Software for Options Trading: 10 Reasons

Why You Need to Analyse the Algo Trading Strategy?

In Algo Trading when you deploy any strategy you have the facility to view its various aspects that can help you to understand the various factors that can occur when the strategy will be executed in the live market. When you perform the strategy analysis in the AlgoTest, you can see a payoff graph, margin required for trading, maximum profit & loss, risk & reward and breakeven point etc.

All these are the crucial information you need to check and analyse before you activate the strategy for execution in the live market. Based on this information you can choose another strategy or can add more trade positions to hedge your strategy or minimize the impact of losses. It will also help you to adjust the parameters or modify the terms and conditions to execute the strategy or set Algo where to book the profit or exit from your trade position to get the best profit or avoid losses.

How to Analyse Strategies Deployed in TradeRadar or AlgoTest?

Before you start analysing the strategy in your Algo trading software like AlgoTest or TradeRadar, you need to create and deploy the strategy in your system. Once you have chosen from prebuilt strategy or created your own, customised strategy you can deploy the strategy for the execution. After deploying the strategy, you can follow the steps given below to analyse the strategy in AlgoTest.

Also Read: How to Build Bullish Strategy in Traderadar

Analyse the Payoff Graphs​

The payoff graph in the AlgoTest will show you the potential profit or loss you can expect from the underlying security you included for trade in your strategy. This payoff graph will show you the potential profit and loss you can incur when the price of the underlying security moves at different levels.

As the chart is shown above, you can see on the X-axisthe price of the underlying asset showing on the expiration date. While on the Y-axis, you can see the potential profit or loss you can earn or incur respectively. When it comes to lines, the yellow one standing vertically shows the current payoff of your strategy at different underlying asset prices and the blue line represents potential profit and loss at different underlying prices on the expiry date.

Total Mark to market (MTM​)

You can read this section to know when you deploy your strategy how much current total profit or loss, realized + unrealized you can get after execution.

Maximum Profit​ Analysis

This is one of the most important aspects you need to analyse while trading with Algo in options trading. It will show you how much maximum profit you can earn from your strategy if the market moves as per your expectations. And based on the profit earning potential you can adjust the parameters of your strategy to increase or decrease your profit expectations as per your wish.

Risk and Reward​ Analysis

This is a ratio between the risk and reward showing how much risk you are ready to take against the maximum reward you can get from this strategy. To calculate this ratio you can simply divide the amount of risk by the potential reward, you will get the output in terms of ratio. Using this ratio you can decide to go trading with this strategy or are you ready to take a risk at this reward or you can adjust your risk and reward levels?

Analyse the Maximum Loss​

This is another important aspect you need to analyse to know how much loss you can incur trading with your deployed strategy.  It shows the maximum potential loss your strategy may incur if the market or underlying security does not move as per your expectations. Using this information, you choose the right strategy or adjust the existing one as per your risk tolerance capability.

Estimated Margins

To trade in the options, apart from paying the cost of trade value you also need to deposit a certain amount of money to execute your strategy, especially when trying to sell the options. Here in the AlgoTest, you can see the estimated margins on approx. Basis on that you can get to know the margin money in advance to reduce margin calls from the broker or avoid margin penalties from the exchange.

Also Read: What is F&O Margin Penalty: SEBI Rules & How to Avoid it

Know the Breakeven​ Point

In an option strategy, it is a crucial point at which your position will expire and will become at break-even. The breakeven point shows you when you can exit from your strategy if your trade positions achieve this level. If the price of the underlying security moves beyond these breakpoint levels or expires outside these levels, it means, your strategy will start incurring the losses.

Other Parameters and Indicators

Apart from this, there are various other factors and values you can analyse in your deployed strategy. You need to check the option Greeks and square off and, the position type etc. Analysing these parameters you can adjust your trade management allowing you to customize your strategy as per the market conditions.

In AlgoTest, you can perform the analysis of the strategy using the historical data in real-time. However, using the simulator you can refine and validate your strategy and you can also optimize your strategy before deploying into the system. Analysing the strategy in Algo helps to know the various aspects that can help you to know how much you can earn or lose trading with this strategy.

Wrapping-up

Strategy analysis is important to know the potential risks and rewards from your trading. If you perform the analysis in AlgoTest you can analyse the various factors like the payoff graph to know the maximum profit and losses. Here you will also get to know the maximum profit or loss with estimated margins and breakeven point where your strategy will become in profit before the expiry date.

Similarly, you can perform the analysis in Moneysukh’s TradeRadar with the facility to create or build and deploy the strategy in your computer system. The entire procedure can be automated or you can also manage it manually or in combination to trade in the option market with the right strategy. To enjoy this Algo-based trading facility, just open a demat account with Moneysukh log into your Moneysukh Pro mobile trading app and get the best online trading platform at the lowest brokerage.

Also Read: How to Start Algo Trading in Moneysukh: A Best Algo Trading Platform