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Backtest and replay trading

Backtesting / Market Replay

פלטפורמות וכלים

Definition

Testing a strategy on historical data. In backtesting, you run the rules on history and check the result, and in replay trading, you replay the market candle by candle and trade it as if it were live. Both methods take hours, not evaluations.

Detailed explanation

Before buying an evaluation, replay answers the important question: Does your strategy hold up within the account rules, with the threshold, daily loss limit, and consistency rule, and not just whether it's profitable. The trap is to build a strategy that is too tailored to the past. A good test includes different periods, news days, and commissions, and finally a few weeks of real trading with small quantities.

An example from the prop world

A trader runs their setup in replay for 40 trading days of MNQ, with a threshold of $2,000 and the quantity they plan. If in three out of the 40 the account would have hit the drawdown floor, they reduce the quantity before buying an evaluation.

יומן מסחר

Systematic documentation of every trade: entry, exit, drawdown, size, reason, and outcome. In prop accounts, it is the tool for identifying the pattern that causes accounts to fail, not just a summary of profit and loss.

Risk-reward ratio

The ratio between what a trade risks until the drawdown and what it can earn until the target. A ratio of 1:2 means that for every dollar at risk, the target is two dollars. The ratio alone doesn't say much: it is read together with the success rate.

Position size

The decision of how many contracts to open in a trade. It's calculated from the end to the beginning: how much you are allowed to lose per trade, divided by the loss of one contract up to the drawdown. In a prop account, this is the most important decision, because it determines how many mistakes the account can absorb before the threshold.

Rithmic connection

A connection provider through which the platform receives market data and sends orders to the account. The firm determines whether your account runs on Rithmic or Tradovate, and the connection determines which platforms can be used.

Tradovate connection and platform

Broker and futures connection, with its own trading platform that also works in the browser and on mobile. Almost all prop firms on the site offer accounts on Tradovate, and you also connect to TradingView through it.

NinjaTrader platform

A trading and charting platform for futures, one of the most common among prop firm traders. The desktop version runs on Windows only and connects to the account via Rithmic or Tradovate, depending on what the firm provided.