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Your First Backtest

In this guide, you'll create your backtest using Vaanam's Backester. Backtester allows you to define a strategy and run it on 20+ years of historical data. Lets you analyze the potential of a strategy.

Past performance does not guarantee future results

Access the Strategy Builder​

The Backtest feature is available under the Strategies section in the top menu. Clicking it will take you to the Backtest workspace.

We will test a simple strategy of Larry Connor's RSI 2 on the SP500 ETF SPY

Entry

  • RSI(2) < 10
  • Buy at next day’s open

Exit

  • RSI(2) > 90
  • Sell at next day’s open

Backtest Form has 3 Sections

General Section​

General Form

  • Strategy Name - RSI2
  • Universe Selection - SPY
  • Backtest Period - Selected from 2006 - 2025
  • Capital - 100000 USD
  • Allocation - 100% of capital is allocated to the trades

Logic Section​

Logic Form

  • Entry Logic query using AI - previous day's rsi 2 is less than 10
  • When to Buy - Open
  • Exit Logic query using AI - previous day's rsi 2 is less than 90
  • When to Exit - Open
  • Generate - Clicking on generate will populate the queries in Query forms, or you can fill the query directly without using AI

Risk & Settings Section​

Risk &amp; Setting Form

  • Rebalance Frequency - Daily
  • Time Frame - Daily
  • Commission per Trade - 0.05%
  • Slippage per Trade - 0.05%

Click on Save/Run Backtest, backtest will be submitted and executed. You will be redirected to the Results

Backtest Result Overview​

The overview summarizes the strategy’s performance, including total return, drawdown, and win rate. These metrics help you quickly assess whether the strategy is viable.

Backtest Results

Backtest Result Charts​

Backtest Results Charts

We have two other sections in the results -

  • Trade History - View all trades executed during the backtest
  • Rebalance Activity - View all rebalance activities during the backtest

What’s Next?​

You’ve successfully created and run your first backtest using a simple RSI(2) strategy on SPY.
This example demonstrates how to define entry and exit rules, configure risk settings, and analyze historical performance.

Next, try experimenting with:

  • Different indicators or parameter values
  • Adding stop-loss or take-profit rules
  • Testing the strategy on other symbols or timeframes

As you iterate, focus on understanding drawdowns and consistency—not just total returns.

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