🔥 Introduction
Backtesting lets you test your candlestick strategy against historical data — crucial before risking real money.
This guide covers:
- Why backtest?
- How to backtest manually and with tools
- What to record and analyze
- Avoiding common backtesting mistakes
🕰️ Why Backtest?
Test strategy validity
Understand win/loss ratio
Learn how it behaves in different market conditions
🛠️ How to Backtest Manually
Choose timeframe and crypto asset
Scan historical charts for your candle pattern setups
Record each trade setup: entry, stop-loss, target, outcome
Calculate success rate and risk/reward
💻 How to Backtest Using Tools
Use platforms like TradingView’s Pine Script to code and automate testing
Use spreadsheet for detailed logging
📋 What to Record
Date/time of setup
Candle pattern identified
Confirmation indicators (volume, RSI, MA cross)
Entry price, stop-loss, take-profit
Trade outcome (win/loss)
Notes on market conditions
⚠️ Common Backtesting Mistakes
Ignoring slippage and fees
Selecting only favorable setups (confirmation bias)
Not accounting for emotional factors in real trading
Using too short a timeframe for testing
✅ Tips for Effective Backtesting
- Test on multiple coins and timeframes
- Use consistent rules for entry/exit
- Paper trade after backtesting before live trading
- Refine strategy based on data, not gut feelings