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Basic Backtesting Metrics CAGR Metrics
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Advanced Backtesting Metrics

Backtesting is a crucial process for evaluating the effectiveness of trading strategies. It involves analyzing historical data to assess how a particular strategy would have performed in the past. TrendSpider’s Strategy Tester provides a comprehensive set of advanced backtesting metrics that offer valuable insights into strategy performance.

In this article, we will delve into several advanced backtesting metrics offered by TrendSpider’s Strategy Tester and their role in evaluating trading strategies.

Advanced Backtesting Metrics Defined

The following advanced backtesting metrics are available in TrendSpider’s Strategy Tester within the Tabular Data section, offering traders a comprehensive set of tools to assess the effectiveness and profitability of their trading strategies. With access to these metrics, traders can gain deeper insights into the performance of their strategies, enabling them to make more informed decisions and optimize their trading approach for better results.

  1. Beta (vs Asset): Beta measures the volatility of a strategy’s equity compared to a Buy & Hold approach. If a strategy’s swings exceed those of the Buy & Hold method, the Beta will be greater than 1.0. This metric helps traders assess the relative risk associated with their strategy compared to a passive investment approach.
  2. Loss Loss calculates the standard deviation of returns specifically for losing trades. By focusing on losses, traders can gain insights into the consistency and variability of negative performance. A higher Loss value indicates higher volatility in the strategy’s losing trades.
  3. Return Return measures the standard deviation of returns for all trades, both winning and losing. This metric provides an overall assessment of the strategy’s return volatility. A higher Return value suggests greater variability in the strategy’s performance.
  4. Expectancy: Expectancy combines multiple factors to assess the overall profitability of a strategy. It is calculated using the formula: (rrRatio * winRatio) – lossRatio. Here, rrRatio represents the average profit per winning trade divided by the average loss per losing trade, winRatio represents the percentage of winning trades, and lossRatio represents the percentage of losing trades. Expectancy helps traders understand the potential long-term profitability of their strategy.
  5. Exposure: Exposure measures the percentage of the overall time range during which the strategy was actively invested in positions. It indicates the extent to which the strategy remains exposed to the market. Higher exposure may imply greater risk and potentially higher returns.
  6. Max DD (Asset): Max DD (Asset) stands for Maximum Drawdown of the Buy & Hold approach. It represents the largest percentage decline in the asset’s value during the backtesting period. This metric provides insights into the worst-case scenario for a passive investment in the asset.
  7. Sharpe (90d): Sharpe ratio is a popular risk-adjusted performance measure. The Sharpe (90d) metric calculates the ratio for the last 90 days of a backtest and annualizes it. It considers the excess return generated by the strategy relative to the risk-free rate and the volatility of those returns. A higher Sharpe ratio indicates better risk-adjusted performance.
  8. Sortino (90d): Sortino ratio is another risk-adjusted performance metric that focuses on downside risk. Similar to Sharpe (90d), Sortino (90d) calculates the ratio for the last 90 days of a backtest and annualizes it. However, Sortino ratio only considers the standard deviation of negative returns when measuring risk, while ignoring positive returns. A higher Sortino ratio implies superior risk-adjusted performance in relation to downside volatility.

These metrics serve as invaluable tools for traders to evaluate the performance, risk, and potential profitability of their trading strategies.

The Bottom Line

In conclusion, TrendSpider’s Strategy Tester provides traders with a powerful suite of advanced backtesting metrics that enhance the evaluation of trading strategies. These metrics offer valuable insights into strategy performance, risk-adjusted returns, volatility, drawdowns, and overall profitability. By leveraging these metrics, traders can make more informed decisions, optimize their strategies, and strive for improved trading outcomes.


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Basic Backtesting Metrics CAGR Metrics