Backtesting
Pronunciation: BAK-tes-ting
Testing a trading idea against historical price data to estimate how it would have performed.
Definition
Backtesting is the process of applying a defined set of trading rules to historical price data to estimate how a strategy would have performed. It produces a sample of hypothetical trades you can measure with metrics like win rate, expectancy, R-multiple, and drawdown. Backtesting is review-oriented and educational: past performance never guarantees future results, and an over-tuned backtest can look great while failing live.
In plain English — Backtesting means running the rules of a strategy over past market data to see how it would have done — before you risk any money. It is a way to gather evidence about an edge instead of trusting a hunch. The results are only as honest as the data and the rules you test.
Example
You define "buy the pullback in an uptrend, 1R stop, 2R target", apply it to two years of EURUSD history, and find 180 hypothetical trades with a positive expectancy — evidence worth forward-testing, not a promise.
Related terms
Where you see this in the app
Educational content only. Map.Trade does not provide financial advice or trading signals.