Backtesting BTST Strategies

Introduction

BTST (Buy Today, Sell Tomorrow) trading is fast, exciting, and — when done right — profitable. But how do you know if your BTST strategy actually works over time? The answer lies in backtesting: the process of testing a trading strategy using historical market data to see how it would have performed.

In this blog, we'll walk you through the process of backtesting a BTST strategy, share some insights from sample test results, and show you how to use this approach to boost your confidence and refine your trading edge.

What is Backtesting in Trading?

Backtesting involves applying a trading strategy to past market data to evaluate its effectiveness. The goal is to see whether your setup — entry, exit, stop-loss, and target — would have worked in real trading conditions.

For BTST, this means:

• Picking stocks based on certain conditions (volume, breakout, delivery %)

• Checking if they moved in your desired direction the next day

If done honestly and consistently, backtesting helps:

• Validate your ideas

• Eliminate guesswork

• Spot patterns in performance

Our Sample BTST Backtesting Setup

To keep things simple, we ran a basic backtest using a consistent BTST strategy:

Strategy Rules:

• Entry: Buy stocks that closed near day’s high with 2x average volume

• Conditions: Delivery % > 40%, positive news, or breakout from resistance

• Exit: Sell next day at open

• Universe: NSE top 200 stocks

• Period: 3 months (Jan to Mar)

Tools Used:

• ChartInk screener for stock selection

• NSE Bhavcopy data for price action

• Excel for result tracking

Key Results From the Backtest

1. Win Rate: ~62%

Out of 100 trades, about 62 gave a positive return the next day at open.

2. Average Return on Winning Trades: +2.3%

Most winners showed a 1.5% to 3% gain when sold at the next day’s open.

3. Average Loss on Losing Trades: -1.1%

Losses were smaller, especially when news-based picks were avoided during uncertainty.

4. Best Days:

• Post-budget rally week

• Days after strong global cues (NASDAQ gains, etc.)

5. Worst Days:

• During high volatility or negative policy announcements

• Stocks with high intraday volume but poor delivery ratio

Lessons Learned From the Backtest

1. Volume + Delivery % = Key Combo

High volume without delivery often failed. But when combined, the momentum often carried over.

2. Avoid Stocks with Wide Gaps Already

Stocks that already gapped up 5%+ on Day 1 often reversed on Day 2.

3. Sector Trends Matter

Sectors like banking and auto performed more consistently in BTST setups.

4. News-Based Picks Work — But Only Sometimes

News-related spikes (like government policy or earnings) were hit or miss. Often they worked better when confirmed by technical setups.

5. Exit at Open Works Best

In most cases, selling at the open gave better risk-reward than holding for intraday continuation.

How You Can Start Backtesting Your BTST Strategy

Step 1: Define Your Entry Criteria

Are you looking for breakouts? Delivery spikes? News-based setups?

Step 2: Gather Historical Data

You can use NSE's bhavcopy, ChartInk charts, or paid platforms like TradingView.

Step 3: Track Results Manually

Start with Excel. Log:

• Stock name

• Entry price

• Exit price (next day open)

• Delivery %

• Comments (news/volume/technical)

Step 4: Look for Patterns

Ask:

• Are there certain setups that always fail?

• Do some sectors outperform others?

• Is your entry timing consistent?

Step 5: Refine and Repeat

After 20–30 trades, refine your rules based on the results.

Final Thoughts

Backtesting takes time, but it's the single most effective way to build confidence in your strategy. Instead of relying on social media tips or gut feelings, you're working with actual data.

At BTSTStocks.com, we continuously backtest and fine-tune our screening logic to improve the quality of every stock pick. If you want to skip the testing phase and get battle-tested picks each day, sign up for our daily BTST stock recommendations.