Building Your First Backtest

Step 1: Define your strategy rules clearly. When do you enter? When do you exit? What position size? Write these down before touching any data.

Step 2: Get quality historical data. Free sources include Yahoo Finance for stocks and CoinGecko for crypto. For options, you may need paid data from providers like CBOE or OptionMetrics.

Step 3: Choose your backtesting tool. Popular options include Python with Backtrader or Zipline, TradingView Pine Script, or dedicated platforms like QuantConnect and ThinkOrSwim.

Step 4: Code your strategy rules and run the backtest. Start with a simple strategy first — like a moving average crossover — to validate your setup before testing complex strategies.

Step 5: Analyze results using multiple metrics (return, drawdown, Sharpe, win rate). Then run the strategy on out-of-sample data to check for overfitting. Only then consider live trading.