What is backtesting?
Backtesting tests a trading strategy on historical data to see how it would have performed. Learn what it is and why it matters.
Backtesting means running a trading strategy against historical market data to see how it would have performed — before you risk any money (real or virtual) on it going forward.
Why backtest?
- Validate an edge — does the strategy actually make money over time, or did a few lucky trades flatter it?
- Understand the ride — max drawdown, win rate, and streaks tell you if you could stick with it.
- Tune it — compare variations (strikes, stops, timeframes) objectively instead of guessing.
What it can't do
Past performance doesn't guarantee future results, and real markets add slippage and costs. Backtesting narrows down what's worth trying; paper trading forward-tests it live with virtual money before real capital.
On Nifty Paper Trade
Use the Backtest tool to test strategies on historical data, then read the results and refine.
FAQ
Is backtesting the same as paper trading?
No — backtesting uses past data (instant results over history); paper trading tests forward in live markets with virtual money.
Does a good backtest guarantee profit?
No. It's evidence an edge existed historically; markets change, so forward-test before going live.
What should I look at in a backtest?
Net P&L, win rate, and especially max drawdown — see reading backtest results.