Backtesting

Why backtest

Backtesting runs a trading strategy over historical data to see whether it would have worked in the past. It shows how the strategy would have performed in different market conditions, and whether it is likely to work in the future or needs adjusting. It also keeps you from impulsive or uninformed choices, and improves your odds.

Confidence from evidence

A backtest gives you confidence in the strategy. Positive results on historical data build belief in its potential, and testing different scenarios and variations improves it over time. That confidence is what lets you trade with knowledge and conviction instead of hope.

What to measure

A backtest is only as good as what you count. Record every trade the rules would have taken: entry, stop, target, result in R. From those you get the win rate, the average win against the average loss, and the expectancy, the amount the strategy makes per trade on average. A strategy with positive expectancy over a few hundred trades across different conditions is one worth risking money on; one that only worked in a single trending month is not.

Where to run it

You do not need a separate program. Pick any candle on the Trade Desk and step forward from it one candle at a time, with the news and the sessions of that moment, and trade the setup as if you did not know what came next. Log each test trade with a note, and the journal and Reports do the counting: win rate, average R, expectancy and the breakdown by session and by hour. Your real trades live beside the test ones, so you can see whether you actually trade the strategy you tested.