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Backtesting

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Filter:Backtesting

Category – Backtesting

Backtesting is a process that involves testing a trading strategy using historical data to evaluate its potential effectiveness. By simulating trades based on past market conditions, traders can assess how a strategy would have performed, refine it, and mitigate risk before applying it in real-time markets. Backtesting helps traders identify optimal parameters for their strategies, improve profitability, and better understand potential outcomes. It is an essential step in strategy development and risk management.

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OPTIMAL QUANTITY

Optimal Quantity calculates the ideal number of units to trade, balancing risk, reward, and capital constraints. It aligns trade size with risk tolerance and objectives.

LEVERAGE FACTOR

Leverage Factor is the use of borrowed capital to increase the potential return of an investment, expressed as a ratio. It amplifies both potential gains and risks, requiring careful management to avoid excessive exposure.

ENTRY PRICE

Entry Price is the price at which a trader buys or sells an asset to open a position. It serves as the baseline for calculating profits, losses, and risk metrics for the trade.

EXIT PRICE

Exit Price is the price at which a trader closes a position by selling an asset or buying it back. It determines realized profits or losses for the trade.

STOP PRICE

Stop Price is the price at which any stop order—whether a fixed or trailing stop—is executed. It marks the exit point for a trade, ensuring predefined risk or profit-taking thresholds are met.

INVESTMENT VALUE

Investment Value reflects the total monetary amount allocated, giving traders a tangible measure of their capital commitment and its role in their overall portfolio.

INVESTMENT PERCENTAGE

Investment Percentage reflects the proportion of account capital allocated, giving traders a relative measure of their capital commitment and its role in their overall portfolio.

ALLOCATED PROFIT

Allocated Profit is the portion of realized P&L set aside after a trade closes, based on a user-defined percentage. It preserves profits for reserves, reinvestment, or future opportunities, supporting financial planning.

ENTRY DATE

Entry Date is the specific date when a trader initiates a position by buying or selling an asset.

EXIT DATE

Exit Date is the specific date when a trader closes a position by selling an asset or buying it back in the case of short selling.

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