About the Backtest Strategy
What is the Backtest Strategy?
Before trading a trading strategy with real money, check whether its numbers work. This calculator compounds the average win and loss over your number of trades to project ending capital.
It also estimates the longest losing streak you are likely to see, the drawdown it causes, the profit factor and the Kelly position size.
How to use the Backtest Strategy
- Starting Capital (₹) (sample: 5,00,000)
- Win Rate (%) (sample: 55)
- Average Gain on Winning Trades (% of position) (sample: 6)
- Average Loss on Losing Trades (% of position) (sample: 3)
- Number of Trades (sample: 40)
- Capital Allocated per Trade (%) (sample: 10)
- Press Evaluate Strategy (results also refresh as you type). The result card shows the Expected Ending Capital, along with Expectancy per trade (on the position), Profit factor, Likely longest losing streak and Drawdown from that streak.
Formula used
Ending capital = Capital × [(1 + f W)^p × (1 − f L)^(1−p)]ⁿ
- f = share of capital per trade
- W, L = average gain and loss on the position
- Longest losing streak = ≈ ln(n) ÷ ln(1 ÷ (1 − p))
Averages hide sequence risk; run proper backtests on historical data.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Starting Capital (₹) | 5,00,000 |
| Win Rate (%) | 55 |
| Average Gain on Winning Trades (% of position) | 6 |
| Average Loss on Losing Trades (% of position) | 3 |
| Number of Trades | 40 |
| Capital Allocated per Trade (%) | 10 |
| Result | Value |
|---|---|
| Expected Ending Capital | ₹5,40,304 |
| Expectancy per trade (on the position) | 1.95% |
| Profit factor | 2.44 |
| Likely longest losing streak | 5 trades |
| Drawdown from that streak | 1.49% |
| Kelly – capital to risk per trade (most traders use a quarter to half of this) | 32.5% |
| Note | An estimate from averages – real results vary; past performance does not guarantee future returns |
Tips for using the Backtest Strategy
- A profit factor above 1.5 after costs indicates a robust edge.
- Most traders size at a quarter to half of full Kelly to limit drawdowns.