### What is Backtesting?

Before following a trading strategy, it is better for you to read backtest results from the related trading strategy. The backtest result provides you with a set of information on how this strategy performing in a previous period of time or following the market historical data.

This is usually done by professional traders to test the performance of strategies that are owned and compiled before being implemented for real trading on the exchange. On the other hand, backtest result helps new users to get a better understanding of how the trading strategies perform before deciding to join the strategy.

In short, backtest results can help you estimate how profitable the strategy will be and how long it will take to reach your goals with that strategy.

### What Informations is Shown on Backtesting Result?

There is a lot of information listed from the results of backtesting, but in NOBI, we have chosen the most relevant data to help you get a grasp of how the performance of the trading strategy. Here is some explanation.

#### Period

A period is the range of time used by the strategist in conducting backtesting. This time period can be made 6 months, 1 year, 2 years, even the last 3 years to see the strategy performance during the period of selected time.

Testing conducted on different time periods can give different results. for instance, the results of net profit on backtesting held for 6 months are definitely different from those held for a 3 years period.

#### Net Profit

Net Profit is the net value in the form of percentages generated by the trading strategy during the time period picked by the strategist. For example, the Net Profit for the Nova Trend Following strategy is 243.2%, which indicates that during the 3 years period (June 2017 – June 2020) picked by the strategy maker, the strategy succeeded in generating a gain of 243.2% from the capital.

#### Total Closed Trades

Total Closed Trades explains the total number of trades made during the backtesting period. for example, in Nova Trend Following strategy above, it is written that there are 91 total closed trades, which means there are 91 trades conducted during the backtesting period.

#### Percent Profitable

Percent Profitable is the percentage of a trading strategy that will generate profit when trading. This percentage is obtained by dividing the number of trades by the number of times the trade succeeded in generating profit. For example, if the percents profitable of the strategy is 70%, means for the 100 closed trades there are 70 trades that make profits.

#### Profit Factor

Profit Factor is the ratio between the gross profit (gross profit) and gross loss (gross loss). The greater the ratio shows means the greater the potential benefits to be gained compared to losses. For example, if the backtest result states that the profit factor of a strategy is 1: 3, it means that the strategy has a 3x greater profit potential than the loss.

#### Maximal Drawdown

Maximum Drawdown is an indicator that shows the risk of decreasing at a certain time period in trading. This can be observed from the highest peak value recorded on the portfolio minus the next lowest value before the new peak is reached.

We take the example of Max Drawdown information on the Nova Trend Following strategy above wherein mentioned a maximum drawdown of 8.06% which shows the risk of impairment in the strategy is 8.06%. Imagine if you have a trading fund of $ 1,000 then at a certain time the market has decreased (bearish) until it reaches a value of $ 920 before rising again and reaching a value of $ 1000 or more. Then in your trading account, it records a drawdown of 8%.

By understanding the backtest result, you can make a better understanding before choosing a trading strategy to be followed. You can follow the trading strategies provided by Nobi to help you grow crypto assets easily. Free from the burden of having to do trading by yourselves that takes time and energy.

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