Essential Terms Related to RA Algos by AlgoTest
Term | Explanation |
|---|---|
The maximum observed loss from a peak to a trough in the equity curve. It tells you how much your capital could’ve dropped historically. | |
P&L | Stands for Profit & Loss. It reflects the overall return (gains or losses) from a strategy over a given period. |
The difference between expected entry/exit price and actual execution price. Critical in live trading. Learn more | |
RA | Short for Research Analyst – a SEBI-registered individual or entity providing algorithmic strategies for trading. |
Algos | Algorithmic strategies built by RAs for automated or semi-automated trading. Each algo follows a defined logic. |
Backtest | Simulated performance of a strategy using historical data to assess its viability. Doesn’t guarantee future results. |
Forward Test | Testing a strategy in near real-time with virtual capital (not live orders). A bridge between backtest and live trading. Read more |
Algo Trade | Automated execution of trades based on strategy signals, with no manual intervention. |
Taxes & Charges | Includes brokerage, exchange charges, GST, SEBI fees, etc. These impact net returns and are factored into realistic simulations. |
Margin Required | Minimum funds blocked by the broker to carry out a trade, based on exchange rules and broker policy. |
Capital Required | Total amount of funds needed to deploy a strategy, inclusive of margins and potential drawdowns. |
Strategies vs Algos | A strategy is a logical idea or trading plan. An algo is a coded, ready-to-deploy version of that strategy built by an RA. |
Intraday | Strategies that enter and exit positions within the same trading day. No overnight risk. |
Overall MTM | Mark-to-Market profit or loss across all trades, calculated on a daily basis. Used to track real-time performance. |
Percentage of profitable trades over total trades. A higher win % doesn’t always mean higher profits. Why win rate alone can be misleading | |
Loss % | Percentage of trades that closed in a loss. Balanced against win %, and crucial for evaluating strategy reliability. |
Historical Simulations | Backtests run across multiple years to simulate various market cycles like bull, bear, and sideways trends. |
Reward to Risk Ratio | Measures how much reward you get for every unit of risk. A 2:1 ratio means ₹2 profit for every ₹1 risked. |
Expectancy Ratio | Shows the average expected return per trade over time. It factors in both win rate and reward-to-risk. |
Underlying | The actual instrument on which the algo trades, e.g., Nifty, Bank Nifty, or a stock like Reliance. |
Deployment Days | Total number of days the algo has been actively deployed in forward testing or live execution. |
List of Brokers | Brokers supported for algo deployment via AlgoTest, such as Dhan, Zerodha, Groww, AngelOne, 5Paisa, etc. |