Now, Traders can use data of one instrument and trade on another!!
While building the portfolio, with the exchange as NFO i.e., on NSE Futures and Index Options contracts, a user can select underlying instrument data to generate the signals. This option is available at Create Portfolio page. Check below image:
By ticking Underlying stock system automatically selects the underlying stock for the particular derivatives contract. However, the user is free to change the Underlying stock to any other instrument.
How it works on backtesting and live trading?
While backtesting system would generate the orders based on underlying instrument data as if it is the traded instrument. This would help if you need to test your strategy on a futures contract for the period where data is not available.
Live & Papertrade:
For live and paper trade, the system would use underlying stock prices to calculate your conditions as mentioned in strategy and generate the signals but would place or record order in the original instrument.
For example, Trade on NIFTY21JANFUT contract but generate the signal on NIFTY50 index data.
Generally, Futures or options data are not liquid and may give more false signals. hence traders prefer to use underlying data and trade on future or options contract.
Currently, selecting different data instrument is available only on NFO. Do let us know if you need this option to be enabled for other exchanges as well.