The Importance of Backtesting Trading Strategies

Backtesting is the general method for seeing how well a strategy or model would have done ex-post. Backtesting assesses the viability of a trading strategy by discovering how it would play out using historical data. If backtesting works, traders and analysts may have the confidence to employ it going forward.

In simple words, backtesting a trading strategy is the process of testing a trading hypothesis/strategy on prior time periods. Instead of applying a strategy for the time period forward (to judge performance), which could take years.

Backtesting results of Cross-x Trading Strategy

A strategy performance report may contain a tremendous amount of information regarding a trading system’s performance. While all of the statistics are important, it’s helpful to narrow the initial scope to five key performance metrics:

Net Profit: Displays the net profit or loss during the specified period. Profit is displayed as a positive number, Loss is displayed as a negative number.  

Percent Profitable: Displays the percentage of completed trades that were profitable, during the specified period. Percent Profitable = Winning Trades divided by Total Number of Trades.

Profit Factor: Displays the amount made in relation to the amount lost. This value is calculated by dividing Gross Profit by Gross Loss. By definition, a value greater than 1 means the trades have a positive net profit.

Maximum Drawdown: Display the largest cutback in profit. the maximum drawdown metric refers to the “worst-case scenario” for a trading period. It measures the greatest distance, or loss, from a previous equity peak. This metric can help measure the amount of risk.

Average Trade: displays the average result of all trades, calculated as Net Profit/Total Number Trades.

This is backtesting of the cross-x indicator with Bitcoin. We backtest it in 3 day time-frame because it has the best results.

Backtesting results of Cross-X strategy for the last 6 years in Tradingview.

Backtesting results of Cross-X strategy for the last 2 years in Tradingview.

Backtesting results of Cross-X strategy for the last 1 year in Tradingview.

Trade Like a Pro

Highly Net Profit, highly Percent Profitable, highly Profit Factor and non repaint. You can use the link and VDO below to see more details about backtesting of CrossX strategy.

To see more details of CrossX Pro backtesting on tradingview : Click here