// Definition
Backtesting is testing a trading idea on past price data to see how it would have performed.
Explained simply
You apply the exact rules of a strategy to historical charts and record every trade: entry, stop-loss, target and result. This shows the win rate, the average win and loss, and how bad the losing streaks can get.
Past results do not guarantee future results, but a strategy that fails on past data is unlikely to work live.
Tip
Include fees and test across different market conditions. A strategy that only worked in one strong trend is not robust.
For education only, not financial advice. Trading is risky and you can lose money.