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Glossary / Performance metrics

Backtesting

Definition

Testing a strategy against historical price data.

Why it matters

Manual bar-by-bar replay avoids the hindsight bias of scrolling a finished chart, and it produces the same statistics as live trading.

Example

200 historical occurrences of a setup producing a 41% win rate at 1:2.2 imply an expectancy of about +0.35R per trade before costs.

How to track it in a journal

TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so backtesting stops being something you estimate and becomes something you read.

Related terms

Expectancy
The average profit or loss you can expect from each trade over a large sample.
Profit factor
Gross profit divided by gross loss.
Win rate
The share of your trades that close in profit.
Average win
Total profit from winning trades divided by the number of winning trades.

Questions that use this term

Keep reading

Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
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