> ## Documentation Index
> Fetch the complete documentation index at: https://docs.ezorro.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Professional Strategy Backtesting

> Test your trading strategies on historical market data before using them live. Explore how strategies might have behaved under different conditions.

Backtesting helps evaluate how a strategy could have behaved in the past. eZorro's advanced backtesting uses historical data and trading cost assumptions to provide realistic insights into potential performance.

<Card title="Test Your Strategy" icon="rocket" href="https://platform.ezorro.app">
  Backtest your trading strategies on historical data. Review performance metrics and refine before going live.
</Card>

## Why Backtesting Matters

<CardGroup cols={3}>
  <Card title="Realistic Costs" icon="receipt">
    Incorporates commissions, slippage, and market impact to give more realistic results.
  </Card>

  <Card title="Historical Market Data" icon="database">
    Uses complete historical data, including companies that failed and corporate actions.
  </Card>

  <Card title="Advanced Methods" icon="chart-mixed">
    Supports walk-forward analysis and Monte Carlo testing, commonly used in professional research.
  </Card>
</CardGroup>

## How Backtesting Works

<Steps>
  <Step title="Historical Data Testing">
    Run your strategy on 3–5 years of market data to see how it might have behaved across different conditions.
  </Step>

  <Step title="Trading Cost Simulation">
    Factor in commissions, slippage, and market impact to approximate realistic execution.
  </Step>

  <Step title="Performance Review">
    Review metrics such as total return, win rate, maximum drawdown, and risk-adjusted outcomes.
  </Step>
</Steps>

## Common Performance Metrics

<CardGroup cols={2}>
  <Card title="Total Returns" icon="chart-line">
    Shows overall gains or losses during the test period, including costs.
  </Card>

  <Card title="Win Rate" icon="bullseye">
    The percentage of trades that closed profitably. Provides insight into consistency.
  </Card>

  <Card title="Maximum Drawdown" icon="arrow-down">
    The largest peak-to-trough decline. Highlights potential downside risk.
  </Card>

  <Card title="Sharpe Ratio" icon="scale-balanced">
    A measure comparing returns to volatility. Often used to evaluate risk-adjusted results.
  </Card>
</CardGroup>

## Interpreting Results

<Steps>
  <Step title="Identify Strengths">
    Look for strategies that perform reasonably across different years and market conditions.
  </Step>

  <Step title="Spot Red Flags">
    Be cautious of strategies that only perform in one type of market, have very large drawdowns, or rely on very few trades.
  </Step>

  <Step title="Condition Testing">
    Evaluate how your strategy behaves in bull, bear, and sideways markets to understand potential robustness.
  </Step>
</Steps>

## What Makes eZorro Different

<CardGroup cols={2}>
  <Card title="Complete Data" icon="database">
    Includes all stocks from the testing period, even those that no longer exist, to avoid survivorship bias.
  </Card>

  <Card title="Realistic Costs" icon="receipt">
    Incorporates commissions, slippage, and market impact to approximate live trading conditions.
  </Card>

  <Card title="No Future Peeking" icon="eye-slash">
    Only uses information available at the time of each trade in the test. Prevents look-ahead bias.
  </Card>

  <Card title="Corporate Actions" icon="building">
    Accounts for stock splits, dividends, mergers, and spin-offs automatically.
  </Card>
</CardGroup>

## Get Started

<Card title="Backtest Your Strategy" icon="rocket" href="https://platform.ezorro.app">
  Test your trading strategies on historical data with professional-grade backtesting. Gain insights before committing real capital.
</Card>

## Next Steps

<CardGroup cols={2}>
  <Card title="Strategy Construction" icon="hammer" href="/technical/strategy-construction">
    Learn how to build strategies that can be evaluated through backtesting.
  </Card>

  <Card title="Technical Indicators" icon="chart-line" href="/technical/indicators">
    Explore indicators commonly used in backtested strategies.
  </Card>

  <Card title="Risk Management" icon="shield" href="/trading-strategies/risk-management">
    Understand how to apply risk controls that affect backtest outcomes.
  </Card>

  <Card title="Beginner Strategies" icon="graduation-cap" href="/trading-strategies/beginner-strategies">
    Explore sample strategies with backtesting results and metrics.
  </Card>
</CardGroup>

***

<sub>⚠️ Backtesting results are hypothetical and based on historical data. They do not guarantee future performance. Trading involves risk, including the possible loss of capital.</sub>