Understanding Your Results
A backtest tells you how a strategy would have performed on past data. It does not predict the future. Focus on understanding how the money was made — not just whether it was made.
Core Metrics
Total Return (%)
Percent growth of your capital over the test.
Compare with buy-and-hold to see if the strategy added value.
Final Capital (₹)
Value at the end of the test, including open positions.
CAGR (%)
Annualised return — the yearly equivalent.
Very short tests (under 30 days) can produce misleading CAGR.
Total Trades
Number of completed buy-sell round trips.
Win Rate (%)
Percentage of trades that were profitable.
A high win rate alone does not mean profit — check Profit Factor too.
Profit Factor
Gross profits divided by gross losses.
Above 1.5 is generally healthy. Above 2 is very good.
Maximum Drawdown (%)
Largest fall from a peak before recovery.
Lower is easier to tolerate emotionally.
Net Profit After Costs (₹)
Profit after transaction costs, slippage, and dividends.
Advanced Metrics
Sharpe Ratio
Return per unit of risk.
Above 1 is good, above 2 is excellent.
Average Win / Average Loss
Average size of winning vs losing trades.
Wins should be meaningfully larger than losses.
Average Holding Period
Average days each position was held.
Market Exposure (%)
How much of the time your money was actually invested.
Maximum Consecutive Losses
Longest losing streak.
Prepare emotionally for this — even good strategies have losing streaks.
Charts
Equity Curve
How your portfolio value changed over time.
Smooth rises are healthy. Sharp drops show risk events.
Drawdown Chart
How far below the previous peak you were at each point.
Deep valleys mean large temporary losses.
Monthly Returns
Performance broken down by month.
Consistency across months is usually a good sign.
Past performance does not guarantee future results. Backtests are hypothetical and simplify real-world trading.