Understanding Results
Learn how to interpret backtest results and performance metrics.
Results Tabs
Backtest results are organized into four tabs:
- Overview — Key performance metrics
- Charts — Visual performance analysis
- Trade History — Individual trade details
- Rebalance Activity — Portfolio changes over time
Overview Tab
Total Return
Percentage gain/loss over the entire backtest period.
Formula: (Final Portfolio Value - Initial Capital) / Initial Capital * 100
Example:
Initial Capital: $100,000
Final Value: $145,000
Total Return: +45%
Interpretation:
- Positive — Strategy was profitable
- Negative — Strategy lost money
- Compare to benchmark — Did it beat buy-and-hold S&P 500?
Sharpe Ratio
Risk-adjusted return metric. Higher is better.
Formula: (Average Return - Risk-Free Rate) / Standard Deviation of Returns
Interpretation:
- < 0 — Losing money
- 0 - 1 — Subpar risk-adjusted returns
- 1 - 2 — Good risk-adjusted returns
- 2 - 3 — Very good
- > 3 — Excellent (rare)
Example:
Sharpe Ratio: 1.5
This means the strategy earned 1.5 units of return for every unit of risk taken.
Maximum Drawdown
Largest peak-to-trough decline during the backtest.
Formula: (Trough Value - Peak Value) / Peak Value * 100
Example:
Peak Portfolio Value: $150,000
Trough Value: $120,000
Max Drawdown: -20%
Interpretation:
- < 10% — Low risk
- 10-20% — Moderate risk
- 20-30% — High risk
- > 30% — Very high risk
💡 Tip: Can you stomach a 20% loss? If not, the strategy may be too risky for you.
Win Rate
Percentage of profitable trades.
Formula: (Winning Trades / Total Trades) * 100
Example:
Total Trades: 100
Winning Trades: 58
Win Rate: 58%
Interpretation:
- < 40% — Low win rate (needs large winners)
- 40-60% — Balanced
- > 60% — High win rate (can tolerate small winners)
⚠️ Note: High win rate doesn't guarantee profitability. A 90% win rate with small wins and huge losses is still bad.
Profit Factor
Ratio of gross profits to gross losses.
Formula: Total Profit from Winners / Total Loss from Losers
Example:
Total Profit: $50,000
Total Loss: $25,000
Profit Factor: 2.0
Interpretation:
- < 1.0 — Losing strategy
- 1.0 - 1.5 — Marginal
- 1.5 - 2.0 — Good
- > 2.0 — Excellent
Total Trades
Number of completed round-trip trades (entry + exit).
Interpretation:
- < 10 — Not enough data (statistically insignificant)
- 10-50 — Moderate sample size
- 50-100 — Good sample size
- > 100 — Statistically significant
💡 Tip: Need at least 30 trades for meaningful results.
Average Trade Duration
Average number of days a position is held.
Example:
Average Duration: 12 days
Interpretation:
- < 1 day — Day trading
- 1-7 days — Swing trading
- 7-30 days — Short-term
- > 30 days — Long-term
Charts Tab
Equity Curve
Line chart showing portfolio value over time.
What to look for:
- Smooth upward slope — Consistent growth
- Sharp drops — Drawdown periods
- Flat periods — Strategy not working
- Volatility — How bumpy is the ride?
Red flags:
- Long flat periods followed by sudden gains (luck?)
- Huge drawdowns that take years to recover
- All gains in one short period (not repeatable)
Drawdown Chart
Shows peak-to-trough declines over time.
What to look for:
- Frequency — How often do drawdowns occur?
- Depth — How severe are they?
- Recovery time — How long to reach new highs?
Example:
Drawdown 1: -15% (recovered in 3 months)
Drawdown 2: -22% (recovered in 8 months)
Drawdown 3: -10% (recovered in 1 month)
Monthly Returns Heatmap
Grid showing returns for each month.
What to look for:
- Consistency — Are most months positive?
- Seasonality — Does strategy work better in certain months?
- Outliers — Are returns driven by a few huge months?
Trade History Tab
Detailed list of every trade with:
- Entry Date — When position was opened
- Exit Date — When position was closed
- Ticker — Stock symbol
- Entry Price — Buy price
- Exit Price — Sell price
- Shares — Position size
- P&L — Profit or loss
- Return % — Percentage gain/loss
Use cases:
- Identify best/worst trades
- Spot patterns in winners/losers
- Verify strategy logic is working correctly
Convert to Screener or Bot
From any backtest result, you can convert the strategy directly:
- Screener button — creates a new screener pre-filled with the strategy's entry conditions, timeframe, and ranking criteria
- Bot button — creates a new paper trading bot pre-filled with the strategy's entry/exit conditions, allocation, and settings
This lets you go from "this strategy works historically" to "let me run it live" in one click.
Rebalance Activity Tab
Shows portfolio changes on each rebalance date.
Information displayed:
- Date — Rebalance date
- Positions Added — New entries
- Positions Removed — Exits
- Portfolio Composition — Current holdings
Use cases:
- Understand portfolio turnover
- See how ranking/rotation works
- Verify rebalancing logic
Comparing Strategies
Key Metrics to Compare
| Metric | Strategy A | Strategy B | Winner |
|---|---|---|---|
| Total Return | +45% | +38% | A |
| Sharpe Ratio | 1.2 | 1.8 | B |
| Max Drawdown | -25% | -12% | B |
| Win Rate | 52% | 65% | B |
| Total Trades | 120 | 45 | A (more data) |
Winner: Strategy B (better risk-adjusted returns despite lower total return)
Red Flags
❌ Too good to be true — 200%+ annual returns with low drawdown
❌ Few trades — < 10 trades (not statistically significant)
❌ All gains in one period — Strategy may not be robust
❌ Huge drawdowns — > 50% max drawdown (too risky)
❌ Low Sharpe ratio — < 0.5 (poor risk-adjusted returns)
Best Practices
✅ Compare to benchmark — Did you beat buy-and-hold?
✅ Check multiple metrics — Don't just look at total return
✅ Analyze drawdowns — Can you handle the worst-case scenario?
✅ Verify trade count — Need enough trades for statistical significance
✅ Look at consistency — Prefer steady gains over lucky outliers
Next Steps
- Entry & Exit Rules — Define your trading logic
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