Traders create algos on the basis of some underlying hypothesis. Once created there needs to be a way to test and validate the hypothesis out.

Backtesting assesses the viability of a trading strategy by analyzing how it would play out with historical data.

Backtesting allows a trader to simulate a trading strategy using historical data to generate results and analyze risk and profitability before risking any actual capital.

A well-conducted backtest that yields positive results assures traders that the strategy is fundamentally sound and is likely to yield profits when implemented in reality. A well-conducted backtest that yields suboptimal results will prompt traders to alter or reject the strategy.

There are many different metrics that can be used to measure the results of a backtest, the most commonly used are:

  • PnL
  • Annualized returns vs a benchmark
  • Sharpe Ratio

At Mudrex, we provide one of the best backtesting platforms for your strategies, a product that significantly reduces the time you spend on optimizing and validating your ideas.

Read more about backtesting.

Backtest your strategies before going on a live run without writing any code. Join Mudrex today!

 

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