How to Backtest Your Trading Strategy the RIGHT Way in 2025 (Step-by-Step)

Backtesting is arguably the most important part of day trading, and if you're not consistently backtesting, you're doing yourself a huge disservice. A trader that never backtests is like a basketball player that the only time they play basketball is when they have a game. They're going to absolutely suck compared to someone who practices and plays basketball every day regardless if they have a game or not. Now, I've been trading for 8 years, and in the beginning of my trading, I backtested completely wrong, and it made me see absolutely no progress with my trading. So in this video, I'm going to show you guys how to correctly backtest so that you guys can actually see results and see progress each and every minute that you put into backtesting. Now, the purpose of backtesting is more than just being on the charts. It's about journaling, tracking, and being able to consistently refine your strategy or even find new strategies by putting in consistent time on the charts. Now backtesting is more than just the charts you need to track, because the ultimate purpose of backtesting is to build, refine, and optimize your strategy. So it's very important that you do it the right way. So let me show you exactly how you should be backtesting to actually get results. All right, so here we are on TradingView. This is where I do most of my backtesting. Now, as an extra trinket or a little bit of value for you guys, There's this other website called FX Replay, which is absolutely amazing when it comes to backtesting. I'm not affiliated, affiliated with them at all. I don't get any commission or anything, but I like using FX Replay because it does a lot of the journaling automatically for you and you're able to go back much further in time because you're going to start realizing— this is what I realized when I actually was putting hours and hours into backtesting every single day. I went way further back than TradingView would let you. So I ran out of things to actually backtest, ran out of time. For me to backtest. But FX Replay actually lets you go back further in your backtesting. But we're going to go over how to do it on TradingView, and honestly, the same exact thing applies on FX Replay if you did want to check them out and use them to, uh, help in your trading and your backtesting even further. But I told you guys, when it comes to backtesting, it's not just about being on the charts and practicing strong support resistance zones, trend lines, breakouts. It's not just about that. You have to do that, but but you also have to track it the same way that you track your live trades. So there are a couple things that you need to track. Let's go over them. So the first thing you need to be tracking, and keep in mind this is for every trade that you take, as you're taking the trades, you need to track how many wins you took during that backtesting session. Now keep in mind, a backtesting session is as long as you want it to be. I used to backtest for hours and hours and hours every day, especially in the beginning, 'cause I really wanted to get this down. Remember I told you guys in the beginning, the more you backtest, the faster you're able to feel comfortable on the charts, be able to spot support or resistance, trend lines, supply and demands, all these different type of things, and just a better trader overall in a shorter amount of time. A lot of people come to me in my inner circle, want to get mentored by me, and I ask them how much time they're putting into backtesting because they're complaining about not seeing progress in their trading. And they're saying, I put in maybe 30 minutes a week into backtesting. And that's nowhere near enough. If you want to see results in a very, very, very quick amount of time. You need to put a lot of time into backtesting. Just like you right now, you probably have a job or you probably played a sport. I guarantee you in the beginning of your job or your sport, you sucked and you were super slow compared to what you are now. And that's just 'cause you had more time at your job so you know how to do things a lot faster, more efficiently. Same thing when it comes to a sport that you play, you're much better at it 'cause you've spent a lot of time doing it. Same thing when it comes to backtesting. The more time you put into looking at the charts, looking at support or resistance, looking at supply and demand, looking at all these different type of things, you get to spot it a lot faster. And that's what's allowed me to be able to mark up my charts within 3 to 5 minutes every single morning. I don't spend hours marking up my charts. I don't spend a crazy amount of time doing anything when it comes to trading because I instantly see support and resistance zones. I honestly don't spend a lot of time doing anything on the charts because I can instantly see support or resistance zones. I can instantly see a trend line. I can instantly see this. Or that, and that's just because the amount of time that I put in the market. But I said all this to say, you should be backtesting if you want to actually take this serious. You should be backtesting at least 30 minutes a day to be able to start seeing consistent results. Then obviously, if you can backtest more or pile it all over the weekend, that helps as well. I also recommend, and I've said this in multiple videos, also recommend for you guys to actually backtest before you start getting into your trading for the morning take about 15 minutes to backtest beforehand just to get warmed up, just to get used to it. Taking it back to that analogy of being a basketball player or any sport, right? You don't just hop right into the game, you warm up first. So I suggest you guys backtest for at least like 5, 10, 15 minutes before market opens or before you start taking any trades at all. But back to what I was saying. So you want to track your wins, you wanna track your losses, you wanna track how many breakevens you had,. You also want to track why you won or lost each trade, or why you think you won or lost each trade. You also want to decide if you're going to track the amount of ticks that you profited on each trade, or the risk to reward that you profited at the end of each trade. And the reason why this is important is you want to see how profitable a strategy is. Tracking the wins, losses, and break-evens will basically tell you your win rate or your win percentage at the end of your trading session. Or let's say you backtested for 100 trades. It'll tell you your win-loss ratio at those 100 trades, but you also want to see how much money you technically could have made if you were using one contract or if you were always risking $500 on each trade. That's why you want to track either the amount of ticks that you had or that you profited at the end of your session or at the end of the 100 trades or 50 trades or whatever it is for you, or you can track the risk-to-reward ratio. How you tell which one you track is if you're always going for a 2:1 risk-to-reward ratio, let's say the strategy that you're backtesting it's always for a 2:1 risk-to-reward ratio, you could— I would suggest you just track the RRs. That way you know at the end of your session you would have profited— after you subtract the losses from your wins, you would have profited 17 RR or whatever it is, right? Or if you're the type of person that always trades the same contract amount, you don't really go for a specific risk-to-reward ratio every single trade, it can be different for each trade, just track the amount of ticks that you profited at the end of your entire trading session. That way you're tracking to see how profitable the strategy actually is regardless of the win rate itself. 'Cause a lot of times we can have a 40% win rate, a 50% win rate, but we have good risk to reward ratio. So we come out positive a lot of money or a lot of ticks or a good RR at the end of the day. So you want to see that as well. You don't just wanna track your win rate. You also wanna track what day and time you took each trade. The reason why this is so important is because you'll start to notice certain strategies or, um, trading certain pairs or instruments on certain days works out for you better than others. You'll start seeing after 100 trades that most of the time you took trades on a Thursday, for example, you lost, or Monday was your best day, or you should just skip Fridays because you only had one winning trade throughout the entire Friday. So you want to be aware of that, and that's why you want to track the day and the time that you took each trade. Time is obvious as well because you want to be able to track Okay, maybe I should stop trading at around 1:00 PM because every single time I take trades after 1:00 PM, they end up losing. So you want to track all that as well so you can see the patterns when you have the data of your trading. Next, you want to track whether you bought or you sold or you entered a buy position, a sell position, or a call or put. The reason why that's important is because you want to be able to see for yourself because a lot of people, and they don't realize it, a lot of people are better buyers than they are sellers, or some people are better sellers than they are buyers.. So you wanna track that so you could be aware and see for yourself where you fall on that metric. Okay, so now that we understand exactly what we should be tracking, which is probably the most important part of it, because backtesting makes no sense at all if you're not capturing the data to be able to refine and optimize your strategy or find a new strategy. As long as you have this down and you guys are actually tracking this, you are on the right path and you are doing what 99% of people that backtest aren't doing, and that's what's going to set you guys apart. But now let's go into exactly how do we actually backtest? What does backtesting even mean? All right, so on TradingView, we have this feature over here called Replay. Now I believe this is only for if you have a certain subscription on TradingView. I'm pretty sure you can get a free trial if you put your email address in or something like that. But, and you can see in their settings, I'm actually not sure at all, but there's this feature right here called Replay. Now this allows you to be able to go back in time to any period in time. You see, I was over here backtesting. I was backtesting, um, I had a student of mine that wanted to go through some backtesting together in my Inner Circle, so I had a session with him. We were just backtesting. Keep in mind, if you guys want to be able to join my Inner Circle— now keep in mind, if you guys want the opportunity to join my Inner Circle, my Inner Circle is for people who are actually serious about trading, not people who want to make a couple hundred dollars a month. People who want to make 5 to sometimes 6 figures every single month with their trading. I equip them with all the knowledge necessary to do that. You also get to trade live with me every single morning. You have direct access to me. As well as 3 other profitable coaches. And we have a personal trading psychologist inside of my inner circle to help you master your psychology. It's literally packed out with everything you would need to become not just a profitable trader, but a very, very consistently profitable trader. I've made the exact thing that would have helped me 8 years ago get to where I'm at right now in a much, much, much quicker amount of time. I have a lot of people in my inner circle now who just started off trading 3 months ago, 4 months ago, who are now getting $20,000, $30,000, $40,000 payouts every single month, which is super cool. But if any of that sounds interesting to you, and especially if you are trying to be a serious trader and actually make a consistent amount of 5 figures every single month, hit the link inside the description down below to apply to see if you can join Inner Circle. The spots are always limited. I say this all the time, if you guys just go through any of my YouTube comments, you guys are going to see people complaining about the fact that there's never spots. But if you can get a spot in it, it will drastically change your life. But back onto these charts. So it basically allows you to be able to go back in time at any point and delete all the data in front of it simply by pressing this replay button right here. I can actually exit this out and we'll go to a fresh chart. Um, by pressing this replay button right here, you see this is where we're at right now. This is Wednesday March 19th, uh, 2025. I can press this replay button, scroll back, and go anywhere I want to. Let's say I want to go here, and you see it takes me back to this day, and I don't see any of the data before it. The reason why this is so valuable is because we're able to then be able to practice, okay, drawing our resistance zones. We're able to practice drawing our trend lines as we see here. We're able to just practice doing that without cheating for the most part and seeing what happens. Yes, we can scroll back and look at price action and be like, yeah, um, there's a support zone right here, I could have easily bought right here. But it's like that, that term that says, um, everything is clear in hindsight, or something. I don't know what the term is, something like that, where you already know what's going to happen. So obviously you can see, yeah, there's a support zone here and I would have bought right here, um, when in reality most of the time it's if you're not good at trading and you're not confident in your trading, you probably would not have bought here. So that's the benefit of being able to kind of delete the data beforehand and look at it before anything happens, where now you're practicing seeing a support zone, you're practicing seeing price come down into your zone here, and then you can make that decision without knowing what's going to happen afterwards, if you would hop into the trade or not hop into the trade, practicing your stop losses, your take profits, and things like that. So, um, this is basically how I use it. So I decide what strategy I want to backtest. Let's say I want to backtest my, uh, Hybrid Super Scalping strategy, right? And all I would do, I'd throw on this indicator right here called Kill Zones. It's by this person named Oscar VS. I throw this on, and basically what that allows me to do, it allows me to see the session that I, the charts are showing me instead of having to look at the time scale down here that shows me it's 9:08 AM or whatever. It shows you this white line or whatever the default color is, and it shows me, um, basically what time of the day it is. Because I know I'm not trading at 3, 4, 5 o'clock in the morning, so why would I backtest price action during this time? I know I'm not trading at 12 o'clock at night, so why would I backtest price action at that time? I want to be backtesting the session that I actually trade. And I actually trade from around 7 o'clock all the way up to about 1 PM Central Standard Time. And this white line is right when market opens, right when we start seeing some good price action. So that's when I want to start backtesting. And that's why I suggest for you to put on that Kill Zone indicator, so when you're backtesting, it's super easy to know what time of the day it is, um, so you know you're actually practice trading or backtesting during the right session that you would actually be trading in real life. Now, after having that indicator on, it really depends on whatever strategy you're backtesting. But what I personally like to do is I'll go to like the hourly time frame. Let's say I delete all these charts on my— or drawings on this, this chart. What I honestly like realistically like to do, I'll press the replay feature here or press the select bar feature, and I'll close my eyes or like drag the charts where I can't see any of the price action, and I'll just click a random spot. Right now I'm on a random spot. I have no idea what's going to happen next. I have no idea what price action is, is doing right now or what it will do, um, on the next day. And what I'll do, I'll fast forward until I get to this white line because that is my 8 o'clock candlestick. And then once I'm at this line here, then I'm starting to practice drawing up my zones. So let's say I'm drawing up my support zone right here. I have another support zone right down here. I have a support zone down here. Let's say if I go to the 15-minute time frame, I can see we're respecting this trend line right here as well. I can see we created another high right here as well. And I could say, okay, cool, I have my zones drawn out. I practice drawing my support and resistance zones. I'm now making a game plan. Okay, if price comes down here, I'd look for buys off of here. If price comes down here, I look for buys. If price ends up breaking below this trend line right here, I'd probably look for sells down into this zone, or whatever it is. You're practicing your strategy at this point, and then you'd go down, let's say, on your strategy. Keep in mind, this is where it gets flexible for whatever strategy you're backtesting. I mentioned backtesting my hybrid super scalping, but right now I'm backtesting breakouts or support or resistance bounces. But whatever strategy you're testing, let's say you're— you always enter on the 5-minute, you'd wait and see, okay, cool, is price coming down into my zone here. Okay, price tapped into my zone and tapped into both my zones here, gave me a nice rejection candlestick right here. Maybe I'll go down to the 1-minute time frame, see exactly what it's showing me. Let's see if we get some more price action to the downside, because I'd want to see a break of a swing high or something. So let's say we created this high point right here, and if price breaks above here, I'd look for buys with it bouncing off my zones. Price did not come back up here. It tapped into our trend line. So I was fast forwarding it really fast, but let's say my idea was when it breaks this trend line and it breaks below this swing low, similar to my, uh, squeeze strategy that I made a YouTube video about, um, I believe like last week, I would have hopped into the trade right here. And let's say I would have targeted right here, right, how I'd originally planned on the— when I was looking at the 5-minute. And let's see what happens. So we would have been in profit, price would have came to retest it, price then sell down and price hit full TP here. So in this instance, remember I told you guys we have to journal everything that happened. So we would have journaled, okay, we entered on a squeeze strategy to the downside, we entered for sells, we won 282 ticks or we won a 2.5 RR, whatever we're tracking at that moment. We think we won because we saw price fail to break above these swing highs, fail to hold any of these supports to the upside. It ended up breaking our trend line and it broke a swing low right here. So we entered the trade on that. We targeted a recent low. This was the recent low that we targeted. Price tapped into it. We won the trade. This was on a Friday and we entered the trade at around 9:40. So now we know, okay, Friday, 9:40, we now have this data. And this was a winning trade. So as simple as that, that's realistically how I backtest. I'll, like I said, once this trade is done, let's say I only take one trade a day, you really want to treat this as if you're trading in real life. So if your trading plan says you only take one trade a day no matter if you win or lose, then you go to, then you have to wait till the next day to trade. That's the same way you trade this. So we got our win for the day. Now we can fast forward go to the next day, we're going to look for this yellow line. The yellow line means London session started, New York session will start right after. So this is— this is the 7 o'clock candlestick. The next candlestick would be 8 o'clock and the white line will pop up. So now we can redraw our zones, redraw what we're looking at. Okay, so we now have a new support zone or resistance zone right here. We have, uh, technically another trend line right here. I don't really love this one too much. And we Really, right now, if I was looking at this in real time, I'd probably look for a break and a retest of this zone to the upside, or potentially wait for price to come down here to retest this trend line and then possibly break to the downside again, similar to how, uh, we had recently done before. But let's go fast forward and see exactly what happens, see if we end up even getting a setup. So we see price comes up here, breaks above it. So now we're getting our break out of here. Now we want price to come Well, now I'd be looking for price to come back down here if I was using this strategy. Remember, don't take this strategy as the only strategy that you can actually backtest. Um, whatever strategy you're using, I'm just showing you guys the example of how I would backtest into it. So again, remember, I'm still waiting for price to actually come back down here to retest and buy, get buys off of. But it looks like price is running away, so I would have just wrote in my journal or in my— when I'm journaling my back testing, I would have just wrote no trade today. It didn't do what I wanted it to do, um, for my setup or whatever. Now that's exactly how I do it, and that's how you should be back testing. You don't want to back test where you see the price action already, because like I mentioned before, everything's clear in hindsight. You don't want to do that. You want to treat it as if you're actually trading in the markets, because we don't know what's going to happen next in the markets. And that's why we want to treat it as if, um, this is the live markets and we're using this replay feature. Now keep in mind, the replay feature works the same exact way it does on TradingView on FX Replay if you do decide to actually use this platform. I'm not going to go through it because like I said, it works the exact same. Um, but you can use TradingView just to start off, and then if you want more data or want it to track your trades a little bit better, you can use the replay FX Replay here. Now, um, a lot of people ask me about this as well. They ask me about this little section down here with buy or sell on it. Uh, you can— this is kind of like a demo trading. So let's say your backtesting strategy led you here, you wanted sells right here, you could press sell right here. I don't really like using it, honestly. It doesn't really work that well for me because it goes based off the candlestick. And let's say with my strategy, I'm entering as soon as it breaks below a zone or on top of a zone. I can't do that on this buy and sell section right here, so I don't really like using it at all. I just manually track it myself, and then I have that inside my journaling notes. But you can use that feature if that does help you and it does help your strategy. Now, a lot of you guys know that I really don't trade with regular candlesticks. I usually like to trade with Heikin-Ashi candlesticks. And if you guys are like me or have been using Heikin-Ashi candlesticks in your strategy forces you to have to use Heiken Ashi candlesticks. TradingView actually blocks you from being able to replay if you're on Heiken Ashi. It says bar replay isn't available for this chart type, but there's a hack. I literally just went over this hack with my inner circle on the live call, I think like 2 days ago, because a lot of people don't know about it. I found out about it a long time ago when I first started trading Heiken Ashi because I was in the same dilemma. Keep in mind, you don't have to do this on the FX Replay. FX Replay lets you backtest with Heiken Ashi. I don't know why TradingView doesn't let you do it, but there's a workaround for it. Let me show you guys it really quickly. All you have to do is come over here on indicators and you're going to type in Heikin-Ashi candle overlay. It's by this person named Bjorgum. You'll press that, you'll see it'll go onto your chart. Now obviously this looks a little bit weird because this is overlaying on top of regular candlesticks, so right-click on your screen, press settings, and under symbol, turn off the body, the borders, and the wick. That way you turned off seeing regular candlesticks all you have on is that indicator, that Heikin-Ashi overlay indicator. So to you, you see Heikin-Ashi candlesticks, but to TradingView, you're still on regular candlesticks. So this is a super, super, uh, cool hack that I found, and I shared it with my inner circle a couple days ago on the live call. Like I mentioned before, if you guys want to be able to join the inner circle, be on the live calls— it's not just live trading every single morning, but while we're waiting for trades and setups, I'm answering questions, showing you guys tips and tricks like this, just helping you guys with your trading overall. Um, so yeah, if you guys want to have the opportunity to join my Inner Circle, hit the link inside the description down below. It'll be the first link in the description. Um, but yeah, super, super cool hack to be able to backtest with Heikin-Ashi. I highly suggest you guys do test it out. Knowing how to backtest means absolutely nothing if you don't have a proven strategy to actually backtest. Good thing for you guys, I made this video right here where I broke down the literal best scalping strategy, no matter if you're a complete beginner who barely knows anything about trading, or if you're an advanced trader. This is the best scalping strategy that you could ever use. So watch this video and go and backtest this strategy for a couple hours and thank me later.