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How to read a backtest honestly

What a backtest can tell you, and the ways it fools you.

A backtest replays history with your exact rules, charging fees and slippage on the way in and out. It shows how the rules would have done, not how they will do.

Fewer than about 30 trades says almost nothing: a few lucky trades can make anything look good.

Every time you tweak a setting until the result improves, you fit the past a little more. Test the final version on a period you did not use while building it, and run it on paper before real money.

Look at the drawdown, not only the return: the deepest fall from a peak is what you would have had to sit through.

No indicator predicts the market on its own. Build the rule, then test it on years of history with fees included. Try TradeXtool free for 14 days.