Backtesting uses historical market data to simulate past performance and validate strategy effectiveness.
Key metrics:
Metric | Meaning | Benchmark |
Win Rate | % of profitable trades | Higher = better; e.g., 85.7% in 30-day fast backtest |
Profit/Loss Ratio | Avg profit / Avg loss | >1 = healthy; 14.28 = excellent |
Expected Value (EV) | Avg expected profit per trade | Positive = valid strategy |
Max Drawdown (Max DD) | Peak-to-trough loss | Lower = better risk control |
Trigger Frequency | Trade frequency | Adjustable; 0.2/day = low-frequency |
Sharpe Ratio | Excess return per risk | >1 = excellent |
Profit Factor | Gross profit / Gross loss | >1.5 = high-quality |
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