Before any strategy is considered for deployment, it's evaluated against historical data to understand how it would have performed — and where it might break down.
Illustrative figures shown for a demo strategy — every real backtest is specific to the strategy and market being tested.
Initial Capital
$50,000
Final Equity
$71,240
Net Profit
+42.5%
Max Drawdown
-11.8%
Win Rate
54.3%
Profit Factor
1.62
Number of Trades
1,284
Average Trade
+$16.60
Sharpe Ratio
1.34
Sortino Ratio
1.81
Annual Return
8.1%
Risk / Reward
1 : 1.9
Backtests run on historical market data appropriate to the instrument and timeframe being tested.
Strategies are typically tested against approximately five years of data, measured backward from the current date.
Where appropriate, results are examined across different time windows to reduce overfitting to a single period.
Commissions and fees can be modeled into results for a more realistic picture of net performance.
Bid/ask spread assumptions are factored in, since they directly affect entry and exit pricing.
Estimated slippage can be applied to account for the gap between expected and actual execution price.
Peak-to-trough decline is tracked closely, since it reflects the real emotional and capital cost of a strategy.
How capital is allocated per trade shapes both return potential and risk exposure.
Sharpe ratio, Sortino ratio, and risk/reward are calculated to contextualize returns against volatility.
The equity curve visualizes how account value evolves over the test period, trade by trade.
Win rate, profit factor, average trade, and trade count round out a full performance picture.
We look at how sensitive results are to small changes in parameters or market conditions.
Each stage exists to validate the strategy further before real capital is put at risk.
Historical simulation against past market data to evaluate the strategy's logic and performance profile.
Forward-testing in real market conditions without risking real capital, to validate live behavior.
Deployment with real capital, typically after backtest and paper-trading results support moving forward.
Historical backtest results are hypothetical and do not guarantee future performance. Actual results may differ due to market conditions, liquidity, spreads, slippage, execution, fees, and other factors. Nothing on this website constitutes investment advice.
