Strategy Backtester · Foundations
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The Strategy Backtester, Explained
A trading idea is only worth risking money on if it has paid before. The backtester turns a rule into evidence — an equity curve instead of a hunch.
What a backtest actually answers
State a rule and the engine replays it over history, then reports the numbers that matter: an equity curve against buy-and-hold, the hit rate, the average win and loss, the maximum drawdown, and the trade count. The goal is not a single good year — it is whether an edge survives costs and, just as important, whether its worst drawdown is one you could actually sit through.
The four parts of a rule
Every testable rule has four pieces: an entry condition (what has to be true to get in), a structure (what you put on), an exit (what ends the trade), and a sizing method (how much you risk). Change any one and you have a different strategy — which is exactly what the tool lets you explore.
What “pending” means here
Conditions and structures that need the stored Nations-index history or an options-trade history are listed and clearly flagged as pending until those data stores are connected. Everything you can run today executes over real daily price history, so every number you see comes from real data, not a placeholder.
Read it honestly
Backtests assume close-to-close fills with no slippage or commissions, and past results never guarantee future returns. A backtest frames probability, not certainty: it tells you whether an idea has had an edge and how painful holding it has been — context for a decision, not a promise.
Educational content from Nations Indexes. Backtests are descriptive of historical data and are not investment advice or a promise of future results.