Backtest Graph
Geko is here.
A series of items to check in backtesting.
This time, it’s the equity curve (graph).
Appearance matters, so basically it comes down to whether it’s rising on the right side.
Since the horizontal axis of the graph is time and the vertical axis is equity,
the nicer the right-skewed upward graph, the more the equity increases over time.
＊This is based on backtesting data, purely informational.
EA Forward testing is important
Some people may think so, but
I believe that unless a reasonably rising graph is formed during the development stage, I wouldn’t even want to perform forward testing.
What to watch out for when looking at graphs is whether it is a “simple interest” or “compound interest” operation.
Simple interest operation means running over the backtest period with a fixed lot size,
while compound interest operation means adjusting the lot size according to the margin balance.
For example, this image.
This is the simple-interest operation graph for my EA [Eye_Cloud_v3].
The sales page is here ↓↓↓
With a fixed lot size of 0.18, about 12 years of operation testing yielded a net profit of about 1,300,000 yen.
The next graph shows the test results when the same EA is run with compound interest.
The graph is a bit jagged, but
over just over 12 years of operation, net profit reaches 21,800,000 yen.
Compound-interest operation may look paradise-like at first glance, but losses when you lose can be large, so caution is needed.
As a premise, if you do not present a rising backtest with simple interest operation, there is a possibility that you are inflaming speculative sentiment, so I think this is something to be careful about.
