Introduction
The Work That Happens Before the Win
Most traders want results today.
Smart Money traders focus on the data
that builds results tomorrow.
Backtesting is where you prove your edge
before you risk a single dollar.
📍 Backtesting turns theory into evidence,
and evidence into confidence.
What Is Backtesting?
The Definition:
📊 Backtesting is the process of reviewing past price data
to test how your strategy performs
across different market conditions.
True Smart Money backtesting involves:
- Marking liquidity sweeps
- Identifying displacement
- Tracking FVG mitigations
- Studying session behavior
- Measuring trend conditions
- Logging entry, stop, and target precision
💬 In simple terms:
Backtesting = studying the past to dominate the future.
📍 If you can’t prove it in history, you won’t trust it live.
Why Backtesting Matters
Backtesting gives you:
- Confidence in your model
- Clarity on your setups
- Awareness of your weak spots
- Trust in your risk approach
- A measurable edge
- Emotional stability when trading live
Backtesting also reveals:
- Which sessions perform best
- Which setups fail most
- Which entries deliver cleanly
- How often liquidity sweeps occur
💡 Backtesting creates belief, and belief fuels consistency.
How Traders Backtest
1️⃣ Choose one setup and backtest only that
2️⃣ Mark every sweep, displacement, and FVG
3️⃣ Track wins, losses, and missed entries
4️⃣ Record session time and volatility
5️⃣ Review weekly patterns
6️⃣ Build a ruleset based on findings
📍 Backtesting is not fast, it’s foundational.
Example
How Backtesting Builds Precision
A trader backtests 90 days of data.
They record:
- Every liquidity sweep
- Every displacement candle
- Every FVG mitigation
- Session timing
- RR achieved
Their findings:
- Best results come in NY session
- Sweeps during Pre-London often fail
- OB mitigations outperform FVG entries
- Average RR = 1:3
Now their trading is not emotional,
it’s data-driven.
💬 Backtesting showed them the truth the market had been whispering.
The Do Nots
Common Mistakes Traders Make
❌ Backtesting too many setups at once
❌ Cherry-picking winning examples
❌ Ignoring losing streaks
❌ Not tracking data consistently
❌ Rushing through charts instead of studying them
💬 Backtesting is only valuable when it’s brutally honest.
Final Thoughts
Backtesting is the behind the scenes work
that builds real traders.
It strengthens belief in your model,
removes emotional hesitation,
and gives you the confidence
to execute with precision in live markets.
When you know your edge works,
you stop doubting yourself
and start trading like a professional.
Study the charts.
Track the data.
Build the mastery.