Stage 3 ยท tests
How we backtest a trading strategy
Backtest with costs on the account preset, pass thresholds fixed before the test.
The backtest runs the Pine Script strategy on TradingView data for the instrument and timeframe in the rule sheet. Thresholds are fixed before the test runs.
Data and costs
- TradingView data for the instrument and timeframe in the rule sheet; a modeled window of at least 12 months, in calendar quarters
- Commission and slippage per the account preset: per contract for futures, broker spread and commission for CFD.
- Results in three labeled layers: modeled (frozen window), live (from deployment) and forecast (Monte Carlo), never mixed in one sentence
Pass thresholds
| Test | Parameters | Pass when |
|---|---|---|
| Backtest | Modeled window, costs per account preset | at least 60 trades in the window, profit factor of 1.2 or more, net above zero |
| Account fit | Your account preset: max drawdown, daily limit, drawdown model (trailing end-of-day or static) | max end-of-day drawdown at most 70% of the account limit, worst day at most 70% of the daily limit |
Validation report template
What a tested trading strategy has to show, section by section.
Questions
How long is the backtest window?
TradingView data for the instrument and timeframe in the rule sheet; a modeled window of at least 12 months, in calendar quarters.
Are costs included?
Commission and slippage per the account preset: per contract for futures, broker spread and commission for CFD. There is no test without costs.
Next: robustness tests →