Why Measuring Battery Profits Day by Day is Tricky (and How MAT Can Help)

When it comes to measuring battery trading profits, focusing on daily fluctuations can be confusing and misleading. Energy markets are highly volatile, and battery trading involves buying electricity when prices are low (charging) and selling it when prices are high (discharging). While this strategy sounds simple, the day-to-day variability can make understanding the actual profits feel like chasing a moving target.

Daily Data: A Game of Whack-a-Mole

Imagine looking at your battery trading results every single day. Some days, prices may spike due to a heatwave, increasing profits for those days. On other days, the market may be unusually flat or your battery may not be needed for discharging, resulting in lower or no profits.

This day-by-day analysis often makes profits appear as erratic spikes and troughs on a chart. This variability can obscure the bigger picture and make it difficult to answer crucial questions like:

- Is my trading strategy working over the long term?
- Is the market moving in a way that will sustain profits?
- Am I seeing temporary price spikes, or are my profits gradually increasing?

Enter MAT: A Clearer Lens for Long-Term Profitability

This is where the concept of MAT or Moving Annual Total comes into play. Originally popularized in retail analytics, MAT was created to help retailers understand long-term sales trends rather than focusing on short-term variations. In retail, MAT sums up a rolling 12 months of sales, helping businesses smooth out seasonal spikes (like holiday sales) and get a clear view of their underlying growth.

MAT is particularly valuable for energy trading and battery strategies because it helps smooth out short-term volatility and seasonal effects. Instead of zooming in on the daily ups and downs, MAT takes a rolling window of 365 days and sums up all the daily profits. The result? A graph that shows whether your trading strategy is truly gaining momentum or just benefitting from temporary market fluctuations.

Why MAT is a Better Measure for Battery Trading

Let’s break down why MAT works so well for measuring battery profits:

1. Smoothing Out Volatility: Energy markets are notoriously volatile. A day-by-day view will likely give you a graph that looks like a rollercoaster. MAT smooths out those spikes and dips, showing you the average performance over an entire year.
  
2. Removing Seasonality: Some months are naturally more profitable due to higher electricity demand (e.g., during summer air-conditioning loads). MAT helps you remove the "noise" of these seasonal effects and understand the underlying trend.

3. Long-Term Perspective: Trading strategies need time to prove themselves. MAT encourages patience by focusing on cumulative performance over 12 months, providing insights into whether your approach is yielding consistent results.

Real-World Example: Retail Sales to Battery Profits

Let’s take a quick detour to retail, where MAT has a proven track record. Imagine you’re running a clothing store, and sales peak during December due to the holiday shopping season. If you only look at December, it might seem like your store is booming. However, January could be slow, and you could panic if you’re only looking month-by-month.

Retailers use MAT to capture the entire year’s performance, balancing out the spikes in December with slower months like January. This gives them a better sense of whether their business is growing consistently. The same principle applies to battery trading.

The Bottom Line

Using MAT to measure battery profits gives you a clearer view of long-term profitability by smoothing out the noise of daily and seasonal variations. It transforms your analysis from a confusing daily rollercoaster into a stable, long-term perspective. Whether you're a battery trader or a business looking to optimize energy costs, MAT provides a more reliable measure of success.

So, the next time someone asks how profitable your battery strategy is, don’t get lost in daily numbers. Look at the big picture—the Moving Annual Total—to get a true sense of your trading success.