After running your first backtest on Momentum IQ, you will see a results dashboard packed with numbers. This guide explains every metric clearly — what it means, what a good value looks like, and how to use it to judge your strategy.
A backtest result is not a guarantee of future performance. It tells you how the strategy would have performed historically — not how it will perform live.
Returns
CAGR — Compounded Annual Growth Rate
The most important single number. CAGR tells you the annualised return of your strategy as if it grew at a steady rate each year.
| CAGR | Verdict | Context |
|---|---|---|
| Below 12% | ❌ Poor | Nifty 50 buy-and-hold gives ~12% — why bother? |
| 12% – 20% | ✓ Decent | Beats the market slightly after effort |
| 20% – 35% | ✓✓ Good | Strong edge — validate carefully |
| Above 35% | ⚠ Suspicious | Likely overfitted — test on different date range |
Total Return %
The raw percentage gain over the entire test period. Less useful than CAGR for comparing strategies tested over different periods.
Net P&L
Total rupee profit or loss after all brokerage, STT, exchange charges and slippage. Always check this — a strategy can look great before charges but be unprofitable after.
Risk Metrics
Max Drawdown
The largest peak-to-trough loss during the test period. If your strategy had ₹1,00,000, grew to ₹1,50,000, then fell to ₹1,05,000 — the drawdown is 30% (₹45,000 from the peak).
Sharpe Ratio
Risk-adjusted return. It answers: "How much return are you getting per unit of risk?" Higher is better.
| Sharpe Ratio | Quality |
|---|---|
| Below 0 | Worse than risk-free FD |
| 0 – 0.5 | Poor |
| 0.5 – 1.0 | Acceptable |
| 1.0 – 2.0 | Good |
| Above 2.0 | Excellent |
Sortino Ratio
Similar to Sharpe but only penalises downside volatility. A better measure for traders who care more about losses than general volatility.
Trade Statistics
Win Rate
The percentage of trades that were profitable. A common misconception is that a higher win rate always means a better strategy.
Profit Factor
Gross profit divided by gross loss. A Profit Factor above 1.5 is generally considered healthy.
Total Trades
The number of completed trades in the backtest. More is better for statistical confidence.
| Trade Count | Reliability |
|---|---|
| Below 20 | Too few — results are luck, not skill |
| 20 – 50 | Marginal — treat with caution |
| 50 – 200 | Good statistical sample |
| 200+ | Highly reliable |
Average Trade Duration
How long positions are typically held. This helps confirm the strategy matches your trading style — a "swing strategy" that holds for 2 minutes is actually an intraday strategy.
Benchmark Comparison
Momentum IQ compares your strategy against three benchmarks automatically:
- Nifty 50 Buy & Hold — the most important benchmark. Beat this or consider passive investing
- Fixed Deposit at 7% — the risk-free baseline
- Gold (MCX) — alternative asset comparison
The Quick Checklist
✓ CAGR above 20%
✓ Max Drawdown below 25%
✓ Sharpe Ratio above 1.0
✓ Profit Factor above 1.5
✓ 50+ trades in the sample
✓ Beats Nifty 50 buy-and-hold
✓ Tested on at least 3 years of data