(function() { var didInit = false; function initMunchkin() { if(didInit === false) { didInit = true; Munchkin.init('105-GAR-921'); } } var s = document.createElement('script'); s.type = 'text/javascript'; s.defer = true; s.src = '//munchkin.marketo.net/munchkin.js'; s.onreadystatechange = function() { if (this.readyState == 'complete' || this.readyState == 'loaded') { initMunchkin(); } }; s.onload = initMunchkin; document.getElementsByTagName('head')[0].appendChild(s); })();(function(h,o,t,j,a,r){ h.hj=h.hj||function(){(h.hj.q=h.hj.q||[]).push(arguments)}; h._hjSettings={hjid:1422437,hjsv:6}; a=o.getElementsByTagName('head')[0]; r=o.createElement('script');r.defer=1; r.src=t+h._hjSettings.hjid+j+h._hjSettings.hjsv; a.appendChild(r); })(window,document,'https://static.hotjar.com/c/hotjar-','.js?sv=');

Backtesting

Backtesting is where traders simulate trades on historical data to assess a strategy's potential profitability, risk, and consistency, providing insights into how it might perform under similar market conditions in the future. A backtest report will display the strategy's historical win/loss percentage, risk-to-reward ratio and many other statistics to help a trader understand the strategy's strengths and weaknesses.

Backtesting limitations

Past performance is not always indicative of future results. Changing market conditions, economic factors, and sentiment can reduce the profitability of a strategy which was successful in the past. Through experience, a trader can judge the performance of a backtest and adjust it to the current market conditions.

Back to Dictionary