Back to TradingView PineScript for CFD Traders
Part 3

Reading backtest results: what the numbers actually mean

Net profit is the worst metric. The numbers that matter are drawdown, profit factor, and exposure-adjusted return.

Intermediate9 min readBeginner → AdvancedLesson 12 / 17
Try it in TradingView
Same strategy, with the metrics on screen

The table shows net profit, max drawdown, win rate, and profit factor. Cross-check it against the Strategy Tester tab — and note how slippage=2 changes everything.

//@version=5
strategy("Lesson 12 - Reading the report", overlay=true,
     initial_capital=10000,
     default_qty_type=strategy.percent_of_equity,
     default_qty_value=10,
     commission_type=strategy.commission.cash_per_contract,
     commission_value=0,
     slippage=2)   // 2 ticks — realistic, not optimistic

fast = ta.ema(close, 9)
slow = ta.ema(close, 21)

strategy.entry("Long", strategy.long, when=ta.crossover(fast, slow))
strategy.exit("Long TP/SL", "Long",
     stop  = strategy.position_avg_price * 0.98,
     limit = strategy.position_avg_price * 1.04)
strategy.close("Long", when=ta.crossunder(fast, slow))

plot(fast, "Fast EMA", color=color.blue, linewidth=2)
plot(slow, "Slow EMA", color=color.orange, linewidth=2)

// Live metrics — the four numbers that actually matter.
if barstate.islast
    var table t = table.new(position.top_right, 2, 5, border_width=1)
    table.cell(t, 0, 0, "Net profit",    text_color=color.white)
    table.cell(t, 1, 0, str.tostring(strategy.netprofit, "#.##"))
    table.cell(t, 0, 1, "Max drawdown",  text_color=color.white)
    table.cell(t, 1, 1, str.tostring(strategy.max_drawdown, "#.##"))
    table.cell(t, 0, 2, "Win rate %",    text_color=color.white)
    table.cell(t, 1, 2, str.tostring(strategy.wintrades / math.max(strategy.closedtrades, 1) * 100, "#.#"))
    table.cell(t, 0, 3, "Profit factor", text_color=color.white)
    table.cell(t, 1, 3, str.tostring(strategy.grossprofit / math.max(strategy.grossloss, 1), "#.##"))
    table.cell(t, 0, 4, "Closed trades", text_color=color.white)
    table.cell(t, 1, 4, str.tostring(strategy.closedtrades))
To run it
  1. 1. Open any chart in TradingView and click Pine Editor at the bottom.
  2. 2. Select everything in the editor and paste this over it, then click Save.
  3. 3. Click Add to chart. Open the Strategy Tester tab if it is a strategy.

The Overview tab

Net profit, max drawdown, win rate, profit factor, avg trade. Most beginners look at net profit first. That is the wrong metric — a strategy with $50k profit and 60% max drawdown is much worse than one with $30k profit and 12% drawdown, on a risk-adjusted basis.

What to read first

Max drawdown is the worst peak-to-trough equity loss during the backtest. If it is over 25%, the strategy has a survivability problem — many retail CFD accounts will not survive a 25% drawdown.

Profit factor is gross profit / gross loss. Above 1.5 is decent; above 2.0 is strong; below 1.2 is fragile.

Avg trade / avg win / avg loss tells you the structure. If avg win is 0.8x avg loss, you need a >55% win rate to break even. Most CFD strategies either have high win rate with small wins (mean-reversion) or low win rate with large wins (trend-following).

The Performance Summary

Per-year returns, per-month returns, the long/short breakdown. A strategy that made all its money in one outlier year is not a strategy — it is a tail event. Look for consistency across years.

The List of Trades

Every simulated trade, with entry bar, exit bar, PnL, and the equity curve point. Scroll through this. If you see big losses clustered together, the strategy has a regime dependency. If you see clusters of wins followed by clusters of losses, the edge decays — a red flag.

Common backtest pitfalls

Overfitting — too many parameters tuned to history. Look-ahead bias — using future data the strategy wouldn't have at decision time. Survivorship — testing only on instruments still trading today. Slippage underestimation — assuming fills at the backtested price with no slippage; for CFDs add at least 1 tick of slippage per side.

The honest answer

A backtest that looks too good to be true is too good to be true. If max drawdown is below 5% and the equity curve is a smooth line going up, you almost certainly have a bug or a look-ahead.

What you just did

Lesson 12 of 17 in TradingView PineScript for CFD Traders. When you have run the examples or read the section, tick it off and move to the next lesson.