Backtest

A backtest takes your strategy's saved rules and replays them across real market history — buying, selling and rebalancing exactly as those rules say — to produce an equity curve and the metrics that summarise it. It reads the strategy and changes nothing in it, and it covers history up to the latest available market close. A backtest is evidence about what those rules would have done in the past, never a forecast of what they will do next.

What does a backtest actually produce?

A backtest produces two things you read directly: an equity curve, and a record of how the holdings moved between rebalance dates.

The equity curve is drawn against its benchmark, so the shape of the result is visible and not only its final figure. Falls below a previous peak show up as dips in the line — the same falls the Max drawdown figure reports as a single number.

The second output is what happens to the holdings between one rebalance and the next. Between rebalances the actual weights pull away from the target weights — weight drift. On each scheduled rebalance date they snap back to target. Nothing corrects drift in between, so a mid-period portfolio is a drifted one, not the target mix.

A backtest runs in four steps: your rules go in, Fincanva replays them through history, the replay produces an equity curve, and the curve is distilled into metrics.

1. Rules. The strategy you saved — its universe, its allocation, its risk conditions, its exit rules. A run only reads them, so running a strategy never changes it.
2. Historical replay. Fincanva steps forward through real market history and applies those rules date by date, resetting holdings to their targets on the cadence you set. See Rebalance.
3. Equity curve. The strategy's value on every simulated date, plotted as one line — the whole path it would have taken, not only where it ended. See Equity curve.
4. Metrics. The curve distilled into numbers: CAGR, Sharpe ratio, Max drawdown and the rest. See What every number in Performance Metrics means.

What does it look like in practice?

A two-asset strategy holds 60% in a stock ETP and 40% in a bond ETP, rebalancing back to 60/40 twice a year. The backtest starts both sleeves from the same capital and replays every trading day; at each rebalance date it trims whichever sleeve has grown past its target and tops the other back up to weight. After two rebalances, the equity curve reflects both the market's moves and the two corrections back to 60/40, and the metrics summarise that whole path.

A backtest removes one of the classic research biases outright, reduces several more, and leaves the rest to the person building the strategy. Each bias's own page says how Fincanva handles it; the four below bear most directly on a single run.

• Survivorship bias — removed. Delisted instruments are retained and index membership is resolved as of the simulated date, so a run is measured against the market as it stood on each historical date. The choice of universe and period stays yours — see how Fincanva's data handles delisted companies.
• Overfitting — still yours. It comes from how you build the strategy, not from the computation, so no engine removes it. See how Fincanva handles overfitting.
• Look-ahead bias — see how Fincanva handles it.
• Cost-ignoring bias — see how a backtest accounts for trading costs and taxes and Simulation assumptions.

• A backtest covers history up to the latest available market close. New market days keep arriving, so a finished run ages. A strategy you have marked Live is re-run for you as new data lands; one you have only saved is not — its run status turns Needs re-run after a data refresh and stays there until you run it again.
• A short history shortens the run. A backtest can only cover the period for which the chosen instruments have data, so one instrument with a short history limits how far back the whole run can go.
• Rebalance dates are discrete. Weights are reset only on the cadence you set, never continuously, so drift between two rebalance dates is part of the result rather than a flaw in it.
• A run can end early. If a strategy's value collapses far enough, the run stops trading — see Bankruptcy rules.
• Evidence is not a promise. Removing a bias makes the past more honest; it does not make the future more certain. Read every result as "what these rules would have done", never as "what these rules will do".