Read a backtest report
What the numbers say, and what they do not.
Trading on margin can lose you more than you put in. Past results, including backtests, do not predict future results. Cloud9Trader provides tools and education, not financial advice. Read the full risk warning.
What the report shows
Section titled “What the report shows”- Profit and drawdown. Total profit, and the largest fall from a high point of the account to a later low. Drawdown is what you would have had to sit through.
- Positions. Every position with its open and close, pips and profit. Open a few and check each one opened and closed where your rules say it should.
- Charts. The price with your positions marked and anything you plotted, and the account’s profit over time.
- Log. Everything your algorithm logged, and any warnings about refused orders.
Questions to ask
Section titled “Questions to ask”- How many trades? A handful of trades says little. Dozens over different market conditions say more.
- Is profit spread out, or from one lucky trade? Remove the best trade in your head. Is it still worth running?
- Could you live with the drawdown? If the worst stretch would make you switch it off, it will.
- Does it survive other periods and instruments? Run it on a period you did not tune it on.
- Tick or minute data? Minute data replays four prices a minute. For strategies with tight stops, confirm on every tick.
What a backtest leaves out
Section titled “What a backtest leaves out”Backtests fill at the exact bid or ask, with no slippage, commission or financing. Real results will be worse. See Backtesting honestly.