The Backtest Operation

Many of you have asked for it and finally, it’s here!

Josh avatar
Written by Josh
Updated over a week ago

The idea behind backtesting is to see how your strategy would have fared in past markets.

We do this by recreating in conjunction with historical data, hits that would have occurred in the past using the exact conditions of your strategy.

Let's take a quick look at how this works with an example; When backtesting the below strategy;

  • Entry condition: When the 1-hour bar opens below the 20-MA and closes above the 20-MA.

  • Exit condition: When we reach 0.25% in profit.

  • will find every time an entry and exit condition occurred in the past 90 days.

  • The strategy resulted in 20 hits.

All the hits that appear from this backtest can be found on the EUR/USD historical price chart as such;

  • The entry that was triggered on 29th July 2020 at 15:00 EST(above) can also be seen on the below chart.

  • The bullish candle opens below the 20-MA and closes above the 20-MA, as such the resultant trigger becomes hit 18 of this strategy.

We've made it easy for you to backtest your strategy, so you feel comfortable in trading it.

Click on the following links to continue learning how to run a backtest and how to analyze a backtest.

*Please note that all screenshots and examples are only shown for the purpose of a technical demonstration and should not in any way be construed as recommending any type of trading strategy and they do not constitute any form of advice. Please click here for further explanation.

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