Stage 3 ยท deliverable
What a validation report contains
Eight sections, a pass or not pass per test, and a recommendation: deploy, change the rules, or stop.
Every build in the Validation, Strategy build and Build and deploy packages ends its test stage with one report. It has eight sections and a verdict per test.
- Approved rule sheet and data window
- Backtest: trades, win rate, profit factor, average R, net, max end-of-day drawdown, worst day
- Account fit: results against the limits of your account
- Walk forward: table of windows
- Monte Carlo: 5th percentile drawdown and net, blow rate, distribution
- Sensitivity: map of results
- Challenge pass simulation: firm, account size, rules version date, share of paths that reach the target, median days, causes of the other paths. A simulation from modeled trades, not a prediction of your evaluation result
- Verdict: pass or not pass per test, and a recommendation: deploy, change the rules, or stop
- Assumptions and limitations: costs, data, and what the tests do not detect
Pass thresholds used in the report
| 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 |
| Walk forward | 4 quarterly windows, each out of sample against the previous ones | net above zero in at least 3 of 4 windows |
| Monte Carlo | 1,500 paths, 3-year horizon, trade order resampled from the modeled window | 5th percentile max drawdown within the account limit, blow rate at most 20% |
| Parameter sensitivity | Plus and minus 20% on every numeric parameter in the rule sheet | net above zero in at least 70% of combinations |
| Challenge pass simulation | Rules of your prop firm and account size from the Puravida Edge rules dataset (rules version dated in the report): profit target, drawdown model, daily limit, minimum days, consistency rule; 1,500 Monte Carlo paths of the modeled trades, sizing from the rule sheet | informational, no pass or not pass: share of paths that reach the target without breaking a rule, median days to target, and what ended the other paths |
Validation report template
What a tested trading strategy has to show, section by section.