Backtesting glossary

Running a strategy's fixed rules on past market data to see how they would have traded.

A backtest replays historical prices minute by minute and applies a strategy's rules exactly as written: when to enter, which contracts to trade, when to exit. It shows how the rules behaved in that period, not what they will do next. Every result on this page is a backtest on NSE data.

The strategy already backtested with its default settings over one full year, so results show instantly.

Every strategy in the library has been run once with its default settings from 1 Oct 2025 to 30 Sep 2026 on the Quantsapp backtest server. Change any setting and run it again to see your own version.

The total profit or loss of all trades in the period, in rupees.

The sum of every closed trade's profit or loss over the backtest period. Before costs it uses traded prices only; after costs it also takes off brokerage and the bid-ask spread. It is for the lot size shown, not a percentage return.

The share of trades that closed in profit.

Winning trades divided by all trades. A high win rate does not mean a good strategy on its own: option-selling systems often win 70% of the time and still lose money if the losing trades are much larger. Read it together with the average win and loss, and the profit factor.

The deepest fall in cumulative P&L from a previous high, in rupees.

Track the running total of P&L trade by trade; the drawdown at any point is how far it sits below its best level so far. The maximum drawdown is the worst such fall in the period. It is the loss you would have had to sit through, and a better guide to the capital and patience a strategy needs than the final P&L.

Net P&L divided by the number of trades: what a typical trade made or lost.

Also called expectancy. If it is small compared with the costs of one trade (brokerage, spread, taxes), the edge can disappear once those are paid. Compare the before-costs and after-costs views.

Gross profit of winning trades divided by gross loss of losing trades. Above 1 means profitable.

A profit factor of 1.5 means winners made ₹1.50 for every ₹1 losers lost. Values close to 1 are fragile: a small change in costs or market conditions can turn them into a loss.

The single biggest loss on one trade in the period.

Shows the tail risk of the rules. Strategies that sell options or hold overnight can have a worst trade many times their average loss; check it before sizing up.

Three views of the same run: traded prices only; minus statutory charges; minus charges, ₹20 per order and bid-ask slippage.

Before costs fills every order at the last traded price. After taxes takes off the statutory charges on every order - STT (on the sell side; on exercise for options held to expiry in the money), exchange transaction charges, stamp duty (buy side), the SEBI fee and GST - but no brokerage, which is what a trader on an unlimited plan pays. STT uses the rate in force on each order's date (it rose on 1 April 2026). After all costs adds ₹20 brokerage per order and fills at the real bid-ask quote; because option prices often trade rarely, the last traded price can be stale, and on a few trades the live quote is better, so a strategy can occasionally come out slightly ahead of its before-costs result.

The difference between the price you expected and the price you actually got.

A market order buys at the ask and sells at the bid, which is worse than the last traded price. The after-costs run charges this spread on every order. Deep out-of-the-money options and stock options have wider spreads, so slippage costs them more.

Net P&L after removing the most profitable tenth of trades: does the edge depend on a few lucky days?

If the result turns negative once the best 10% of trades are removed, the strategy's profit came from a handful of big days. That is common for trend-following and option-buying systems and is not necessarily bad, but it means long losing stretches are normal and missing one big day matters.

The three sessions with the biggest combined loss across all trades closed that day.

Look at the dates: they are often event days (budget, election results, RBI policy, global sell-offs). They show what kind of market hurts the strategy most.

The running total of P&L over time, trade by trade.

A steady upward line means consistent results; long flat or falling stretches show how long the strategy can go without making money. The small line next to each strategy in the list is the same curve in miniature.

Intraday trades are closed the same session; positional trades are held overnight or for days.

Positional trades are exposed to overnight gaps, which a stop loss cannot protect against, and need full overnight margin.

Buying near the close and selling in the next session to capture the overnight move.

It earns or loses the gap between today's close and tomorrow's price, and is fully exposed to overnight news.

A rule that exits a position once its loss reaches a set level.

Stops are set in points, percent of premium or rupees. In fast markets the exit can be worse than the stop level (slippage), and in a gap it is filled at the opening price.

A separate stop on each leg of a multi-leg position, e.g. each side of a straddle.

When one leg is stopped out the other usually stays open, so the position becomes directional. A combined stop looks at the total of all legs instead.

A stop that moves in the trade's favour as the price moves, locking in part of the gain.

It never moves back. Tight trails exit early on noise; loose trails give back more profit.

After one leg is stopped out, the other leg's stop is moved to its entry price.

It limits the damage once a straddle turns directional: the remaining leg can still make money but can no longer add a loss.

A rule that exits once the profit reaches a set level.

Targets lock in gains but cut off the big winners that some strategies depend on.

Entering again after a stop is hit, if the same conditions return.

Re-entries recover losses in range-bound markets but add to them on trending days. A maximum number of re-entries caps the damage.

How many lots each trade uses.

The library uses a fixed number of lots unless the rules size by risk. Results scale with lots, but drawdowns scale too.

The money the broker blocks to hold an F&O position, set by the exchange's SPAN and exposure rules.

Selling options or holding futures needs margin; buying options needs only the premium. Hedged positions need less margin.

Options on an index such as NIFTY or SENSEX, settled in cash.

Index options are European style (exercised only at expiry) and cash settled. They are the most liquid derivatives in India, which is why most library strategies trade them.

A call (CE) gains when the price rises; a put (PE) gains when it falls.

Buying an option costs the premium and limits the loss to it. Selling (writing) an option collects the premium but the loss can be large if the market moves sharply against it, which is why sellers need margin and stops.

The fixed price at which an option can be exercised. NIFTY strikes are 50 points apart.

Strategies choose strikes by distance from the current price (points or percent), by premium, or by delta.

The strike closest to the current underlying price.

ATM options have the most time value and the highest gamma and theta. Straddles are usually built at the ATM strike.

OTM options have no intrinsic value (calls above, puts below the price); ITM options do.

OTM options are cheaper and need a larger move to pay off; sellers like them because they usually expire worthless, buyers because they are cheap. ITM options move almost one-for-one with the underlying.

The price of an option, paid by the buyer and received by the seller.

Premium is intrinsic value plus time value. Time value shrinks as expiry approaches (theta) and rises with implied volatility.

A call and a put at the same strike and expiry, usually ATM.

A short straddle sells both and profits if the market stays near the strike as time value decays; it loses on a big move either way. A long straddle buys both and profits from a big move or a jump in volatility.

An OTM call and an OTM put of the same expiry, at different strikes.

A short strangle collects less premium than a straddle but has a wider range before it loses. Strikes are picked by distance, premium or delta.

A short strangle with cheaper options bought further out on both sides to cap the loss.

Four legs: sell an OTM call and put, buy a further OTM call and put. The bought wings limit the worst case and cut margin, at the cost of some premium.

A short ATM straddle with OTM wings bought on both sides to cap the loss.

Collects more premium than an iron condor but has a narrower profit range around the strike.

Sell one option and buy a further OTM option of the same type: a defined-risk directional bet.

A bull put spread profits if the market stays above the sold put; a bear call spread if it stays below the sold call. The most it can lose is the gap between the strikes minus the premium received.

Sell a near-expiry option and buy a later expiry, usually at the same strike.

Profits from the near option decaying faster than the far one. It is hurt by large moves and helped by rising volatility in the far month.

Buying and selling unequal numbers of options of the same type, e.g. buy 1 and sell 2.

Ratio spreads can be entered for little or no cost but carry open-ended risk on the side with more sold options.

A position taken to reduce the risk of another, such as a bought wing or a futures position.

Hedges lower the worst case and usually the margin, but they cost money and reduce profit when the main position works.

How many days are left until the option expires.

Some strategies count calendar days, others trading sessions; the rules say which. Time decay speeds up sharply in the last few days, which is why many selling strategies enter close to expiry.

The volatility the option price implies: how big a move the market is pricing in.

IV rises before events and in sell-offs and falls after them (an IV crush). Option sellers prefer high IV; buyers are hurt when IV drops after they buy.

Where today's IV sits compared with its own range over a past window, from 0 to 100.

An IV percentile of 80 means IV was lower than today on 80% of past days. Selling strategies often trade only when it is high.

The sharp fall in implied volatility once an awaited event (results, policy, election) is over.

Options lose value even if the price barely moves, which helps sellers and hurts buyers who held through the event.

The difference in implied volatility between OTM puts and OTM calls.

Index puts normally trade at higher IV than calls because traders pay up for crash protection. Some strategies trade when the skew is unusually steep or flat.

Measures of how an option's price reacts to the underlying (delta, gamma), time (theta) and volatility (vega).

The library reads Greeks computed from each minute's option prices; strategies use them to choose strikes and measure risk.

How much an option's price changes for a 1-point move in the underlying (0 to 1 for calls, 0 to -1 for puts).

A 0.16-delta option is roughly one standard deviation out of the money. Strategies pick strikes by delta to keep risk similar whatever the volatility, and delta-neutral strategies keep the total close to zero.

How fast delta changes as the price moves. Highest for ATM options near expiry.

Short-gamma positions (sold options) lose more and more as the price moves away; long-gamma positions gain. Gamma scalping trades futures to capture this.

How much an option loses in value each day as expiry approaches, all else equal.

Theta is the option seller's income and the buyer's cost. It grows fastest in the last days before expiry.

How much an option's price changes for a 1-point change in implied volatility.

Long options gain when IV rises; short options lose. Longer-dated options have more vega.

A contract to buy or sell the underlying at a set price on expiry; it moves almost point for point with it.

Futures carry no time decay and need margin. Library futures strategies trade the near-month contract and roll before expiry.

Closing an expiring futures position and opening the same position in the next month.

Each roll costs two orders' worth of brokerage, spread and tax, and the next month usually trades at a premium (basis), so long-holding futures strategies pay it every month.

The gap between the futures price and the spot index price.

Futures usually trade above spot, roughly by the interest cost to expiry. The basis shrinks to zero at expiry.

Long profits when the price rises; short profits when it falls.

In F&O, going short is as simple as selling a future or buying a put; no borrowing is needed.

The fixed quantity of one F&O contract. NIFTY is 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120.

Derivatives trade only in whole lots set by NSE, and NSE revises them from time to time. The library sizes every strategy in lots of the lot size in force on each trade date, so the P&L is for the number of lots in the settings.

The day a weekly option contract settles. NIFTY weeklies expire on Tuesday, SENSEX weeklies on Thursday.

Since late 2024 each exchange keeps only one weekly index expiry: NIFTY on NSE (Tuesday) and SENSEX on BSE (Thursday). BANKNIFTY, FINNIFTY and MIDCPNIFTY now have monthly expiries only. If the expiry day is a holiday, it moves to the previous trading day.

The last expiry of the month; futures and the longer-dated options settle on it.

Index and stock futures, and the monthly options, all expire on the monthly expiry day. A position held past it has to be rolled to the next month's contract.

NSE F&O trades from 09:15 to 15:40 (the close moved from 15:30 to 15:40 on 3 Aug 2026).

Exit times in the library are set before the close. Strategies written for the old 15:30 close keep their exits unless the rules say "at the close".

Tax on F&O trades: 0.15% of option premium on sales and 0.05% of futures value on sales (from 1 Apr 2026).

STT is charged on the sell side of options (on premium) and futures (on contract value), and on exercised in-the-money options. It is not part of the after-costs view here, so add it when judging high-frequency strategies.

A stock enters the F&O ban when open interest crosses 95% of its market-wide position limit; no new positions are allowed.

While a stock is in the ban, traders can only reduce existing positions. The ban list is published daily by NSE. Some strategies use entries into or exits from the ban as a signal.

One time period's open, high, low and close drawn as a bar, e.g. a 5-minute candle.

Strategies build candles of a set length from the minute data; many patterns (inside bar, engulfing, marubozu) are defined on them.

The average closing price of the last N candles; the EMA gives more weight to recent ones.

Price above a rising average is read as an uptrend. A crossover of a fast and slow average is one of the oldest trend signals; it is late by design and whipsaws in sideways markets.

A 0-100 momentum oscillator; above 70 is often called overbought, below 30 oversold.

Some strategies fade those extremes (mean reversion); others buy strength above 60 (momentum).

Measures trend strength from 0 to 100, regardless of direction; above about 25 suggests a trend.

The +DI and -DI lines show the direction. Strategies use ADX to trade trends only when one exists, or to sell options when there is none.

The average size of a candle's range over N candles: a measure of how much the price moves.

Stops and targets set in ATRs adapt to the market: wider when it is volatile, tighter when it is calm.

A trend line set a multiple of ATR away from price that flips side when price crosses it.

Price above the line is an uptrend, below a downtrend. Popular in India for intraday futures and option buying; it lags at turns and whipsaws in ranges.

The day's average price weighted by volume, reset every session.

Institutions benchmark fills against it. Price above VWAP is read as buyers in control; many intraday strategies enter on a cross or a pullback to it.

Bands a set number of standard deviations above and below a moving average.

Touches of the outer band are faded by mean-reversion systems; a squeeze (narrow bands) followed by a break is traded as a breakout.

The gap between a fast and a slow EMA, with a signal line; crossovers are trend signals.

MACD histogram turning positive is read as momentum turning up.

Support and resistance levels calculated from the previous day's high, low and close.

The central pivot range (CPR) is the band between the pivot and the two central levels; a narrow CPR is read as a sign of a trending day ahead. Strategies trade breaks or rejections of these levels.

The high and low of the first few minutes of the session; a break of either side is the trade.

The range length (5, 15 or 30 minutes) changes the result a lot. ORB works on trending days and gives false breaks on range days.

When the session opens above the previous high or close (gap up) or below it (gap down).

Strategies either trade the gap to fill back toward the previous close or to continue in its direction.

Price moving beyond a recent high or low, taken as the start of a move.

Breakouts catch trends but many fail; filters such as volume, ADX or a candle close beyond the level are used to cut false breaks.

Trading against a stretched move on the view that price will return to its average.

Works in range-bound markets and loses on strong trend days, the mirror image of trend following.

Trading in the direction of the current move on the view that it will continue.

Usually a low win rate with a few large winners paying for many small losses.

A chart of fixed-size price bricks that ignores time; a new brick forms only after a set move.

Filters small noise, so trend signals are cleaner but arrive later.

The number of F&O contracts open at a time; it rises when new positions are created.

OI shows where traders are positioned. Large call OI at a strike is often read as resistance, large put OI as support.

Price and OI read together: price up + OI up = long build-up, price down + OI up = short build-up.

Price up with OI falling is short covering, price down with OI falling is long unwinding. Strategies trade in the direction of fresh build-up.

Total put open interest divided by call open interest across the option chain.

A high PCR means more puts written, often read as support beneath the market; very high or very low readings are treated as contrarian signals.

The strike at which option buyers as a whole would lose the most at expiry.

Some traders expect the index to drift toward it near expiry. It moves as OI changes during the week.

The table of all strikes for an expiry with their call and put prices, OI and Greeks.

Strategies read the chain to find the ATM strike, a strike by delta or premium, or OI levels.

NSE's index of expected NIFTY volatility over the next 30 days, from NIFTY option prices.

VIX rises in fear and falls in calm markets. Strategies use it to choose between selling and buying options, or to stand aside on high-risk days.

Daily net buying or selling of Indian shares by foreign and domestic institutions, published after the close.

Because the data is published in the evening, a backtest can only use it from the next session on; the library does exactly that.

NSE's daily breakdown of index futures and options positions by clients, FIIs, DIIs and proprietary traders.

Strategies read, for example, the FII long-to-short ratio in index futures as a sentiment gauge.

How many stocks rose versus fell: a gauge of how broad a move is.

An index rising while most stocks fall is a narrow, fragile rally; breadth strategies look for such divergences.

The weeks when companies report quarterly results; option IV rises before and drops after.

Event strategies buy volatility into the announcement or sell it right after.

Patterns tied to the calendar: day of week, month of year, expiry week, festivals.

Calendar edges are based on few observations each year, so they can disappear; treat them as tilts, not certainties.