CluenexGlossary · Pro tools
Backtest
Testing a trading rule on past prices to see how it would have done.
Why it matters
A backtest turns an idea like “sell when the price drops below its average” into numbers: return, worst fall, number of trades. It shows whether a rule beat simply holding the stock.
How to read it
Past results don’t repeat exactly, and a rule tuned to fit the past usually disappoints later. Judge a rule by whether it lowered the worst fall without giving up too much return, and test it on several stocks.
Also called: strategy test, back test
Related
Yearly return (CAGR)The steady yearly growth rate that would turn the starting amount into the ending amount.Maximum drawdownThe biggest fall from a high to a later low, before a new high was reached.Win rateThe share of completed trades that made money.Trading costsWhat each buy or sell costs you, mostly the gap between the bid and ask prices.
In the Cluenex app, this explanation opens next to every backtest figure, with the live reading for the stock you are looking at. Open it in Cluenex