Reading backtest results

What the Results step shows

From top to bottom, the Results step contains:

1. The strategy's name, the plain-English description of its rules, and a line with the tested dates, the starting balance, the spread and any commission (for example Tested on ... (last 3 months)).
2. The four headline numbers.
3. Adjust strategy, to try other values without touching the canvas.
4. Account balance over time, the balance chart.
5. A one-sentence summary of the result, a line on how the simulation was done, and any important warning.
6. Where the strategy traded, the price chart with every trade.
7. Three tabs: Trades, Monte Carlo and Details.

Two buttons at the top, Change settings and Edit blocks, take you back to the test setup or to the canvas.

The headline numbers

Green values are gains, red values are losses. After a change in Adjust strategy, each headline number that changed also shows what it was before.

More statistics in the Details tab

The Details tab lists the full set of statistics for the run:

Under Data and assumptions the same tab lists the market and timeframe, the exact period in UTC, from when indicators were warmed up (no trades are opened before the period), the spread used in pips and points, and the commission. Verify in MetaTrader is a reminder to confirm the strategy in MetaTrader's Strategy Tester on the same symbol, timeframe and dates.

The summary sentence

Under the balance chart, one sentence sums up the run: whether the strategy made money, lost money or broke even over the period, by how much, across how many trades, and the deepest drop from a peak. When the profit factor is below 1.2 the sentence says the gain was only slight. The line after it repeats how the result was simulated (one-minute data and the spread used) and that results at your broker will differ.

The balance chart

Account balance over time draws the balance after each closed trade. The $ / % switch shows it in dollars or as a return on the starting balance (the default). The dashed line is the starting balance: the curve is green above it and red below it.

Look at the shape, not only the end point. A steady rise with shallow dips is very different from a curve that was flat or falling for most of the period and was saved by one or two large trades. Clicking a trade on the balance chart selects it in the trades list and on the price chart.

When the backtest has enough trades for a Monte Carlo analysis, a line under the balance chart repeats its key number (the max drawdown reached in 1 run out of 20) with an Open Monte Carlo button, and Show Monte Carlo range draws the range of runs onto the balance chart. See Monte Carlo analysis.

The price chart: where the strategy traded

Where the strategy traded shows the market's candles for the tested period with every trade on top. The key above the chart explains the markers:

• ▲ a buy entry and ▼ a sell entry;
• ● an exit, green for a profit and red for a loss;
• shaded zones for the take profit and stop loss of a trade;
• the indicator lines your rules use; oscillators such as RSI are drawn in a lower panel.

Hover a trade to see its stop loss and take profit. Times on the chart are in UTC. When a strategy trades several markets, buttons above the chart switch between them.

Showing a single trade

1. Click a trade in the Trades list (or a trade on the chart).
2. The price chart scrolls into view and shows only that trade. A bar above the chart names it: Trade #, the market and side, the profit and why it closed.
3. Step through trades with Prev and Next.
4. Press Show all trades (or Esc) to see every trade again.

Looking at the worst losing trades one by one is one of the fastest ways to understand a strategy: you can see whether the stop loss was simply too tight, whether entries came at the end of a move, or whether the exit rule closed trades too early.

The trades list

The Trades tab (with the number of trades next to it) lists every closed trade, 20 per page, with Previous and Next to page through. Winning rows are marked green and losing rows red.

On narrow screens some columns are hidden to keep the list readable. If the strategy opened no trades, the list says The rule never fired in this period, so there are no trades to show. (see The rule never fired).

Notes and warnings

Some things make a result less certain without making it wrong. The Details tab shows a count next to its name when there are notes, and lists them under Notes on this run. The most serious ones (too few trades, a spread below what the market normally has) are also shown in a highlighted line under the summary.

Adjust strategy and Apply to canvas

Adjust strategy opens a compact version of your strategy in which the numbers and choices can be edited directly: indicator periods and moving average types, the comparison (is above, is below and so on), cross direction, rising or falling and the number of bars, plain numbers, the timeframe, Buy or Sell, the lot size or risk %, the stop loss and take profit (with a switch between pips and % of price where the block allows it), and trailing stop and break-even distances.

1. Click Adjust strategy under the headline numbers.
2. Change a value. The test runs again on the same period and settings within a moment; the headline numbers update and show what they was before, and the bar shows Return. Original: ... Now: .... The result title is marked Edited, not applied.
3. If a value is outside its allowed range, a message says which range to use (for example indicator periods are whole numbers from 1 to 500, and a MACD fast period must be smaller than its slow period).
4. To keep the changes, click Apply to canvas. The values are written into the blocks they came from, the builder returns to the canvas and a message confirms how many changes were applied, with an Undo button. Ctrl+Z also undoes it.
5. To go back to the values on your canvas, click Reset to original. Close adjustments hides the panel.

Nothing on your canvas changes until you click Apply to canvas. If you edit the blocks on the canvas in the meantime, the edited values can no longer be matched to them; run the test again, then apply.

How to judge a result sensibly

A backtest cannot tell you that a strategy will make money. What it can do is rule out strategies that clearly do not work, and show you how a strategy behaves. A few habits help:

• Count the trades. Ten trades prove nothing either way. Aim for at least 30, and more is better. If there are too few, test a longer period or a lower timeframe.
• Read drawdown next to return. A 20% return with a 25% max drawdown means you would have watched a quarter of the account disappear on the way. Ask whether you could sit through that drawdown with real money, and size the risk for a deeper one, because the future rarely repeats the best case. Monte Carlo analysis shows how much deeper it could have been.
• Never read win rate alone. Look at it together with profit factor and the average win and loss.
• Check costs. Rerun with a wider spread or a commission. If a small cost increase wipes out the result, the edge is thin.
• Check other periods. Run the same strategy on 1M, 3M, 6M and 1Y. A strategy that only works in one window is fragile.
• Inspect the trades. If one or two trades made all the profit, the result depends on rare events.
• Prefer simple rules. Each extra condition fitted to the past makes the backtest look better and the future less certain.

Then confirm the strategy in MetaTrader's Strategy Tester and run it on a demo account. See Limits of a backtest and Export to MT5, MT4, cTrader.

Frequently asked questions

What is a good profit factor?

Above 1 means the winning trades added up to more than the losing ones. There is no universal good value: a profit factor from a handful of trades means little, and a high one on one short period can be luck or overfitting. Read it together with the number of trades and the max drawdown.

What does max drawdown mean in the backtest?

It is the largest drop of the account balance from a previous high point during the test, shown as a percentage of that high point and in dollars. It is the worst losing stretch you would have had to sit through.

Why is the win rate high but the result negative?

Because the losing trades were larger than the winning ones. Compare the average win and average loss in the Details tab, and look at the profit factor.

Does Adjust strategy change my blocks?

Not until you click Apply to canvas. Until then every change is only tested. Apply to canvas writes the values into the existing blocks and can be undone with the Undo button or Ctrl+Z.

What time zone are the trade times in?

The trades list and the charts show times in UTC.