As show in the P and L curve in the above image, Streak has made it extremely easy to read many of the important metrics that a trader must consider before taking his strategy live in the markets and risking actual capital.

Let’s try and understand the significance of various numbers displayed in the backtest results and why they might prove to be the game changer in your trading career.

1) Backtest P&L : The cumulative P&L realized after taking all the trades generated through the algo.

2) Wins vs Losses : Allows one to know the number of trades that ended up being profitable and the ones that weren’t. This important piece of information can help you decide whether your Risk/Reward ratio based on stoploss/profit-target & average loss/losing trade v/s average gain/winnig trade is favorable or not. We’ll learn about risk/reward in the next points.

3) Risk/Reward ratio : It’s directly not mentioned in the backtest results probably because it depends on quite a lot of factors such as Stoploss:Takeprofit ratio and Drawdown:Returns ratio. I would consider the worst of them because that’s what shows the true picture. We all know about Stoploss:Takeproft, lets look at Returns:Drawdown ratio after understanding what’s max drawdown in the next point.

4) Max Drawdown : Max drawdown measures the largest decline in your portfolio or the P&L curve at any given point of time as depicted in the chart present in the above image. Hence, it’s a measure of risk. In the previous point, I mentioned about Drawdown:Returns ratio as a measure of Risk to Reward which has become quite self explanatory after defining Max Drawdown. We need to recall that a loss of 25% needs a gain of 33.33% to recover the losses. This makes it paramount to consider the Drawdown:Returns ratio and the time period during which they occurred so that we know how much time it would take us to recover from a drawdown and if that time is what we can afford towards recovery of drawdown by taking opportunity cost into consideration.

5) Average gain/winning trade & Average loss/losing trade : It is important to know these metrics so that we can evaluate if the win:loss is favorable or not. A low Average gain/winning trade would be acceptable only for a significantly high win/loss ratio.

6) WS, LS (Winning Streak, Losing Streak) : These metrics might help one decide when he might want to stop trading after achieving a certain number of continuous winning trades. Conversely it might also help you decide when to take the strategy live if you have already been paper trading using the strategy (You would want to take the algo live in the market when there has been a significant number of losing streaks during paper trading as depicted by losing streaks of the algorithm). Automated paper trading option is also provided on the Streak platform.

I would be discussing about technical analysis and other features offered by the platform in detail in my upcoming posts so stay tuned and hit the follow button if this has helped you in any way. Comments are very well appreciated so shoot them on to give your opinion or for clarifying doubts and don’t forget to help your fellow mates by sharing the post.