A backtest report is easy to read optimistically. A few things I always check before trusting one:
- Net profit vs max drawdown — a system that made 200% but drew down 60% is not “better” than one that made 40% with an 8% drawdown.
- Number of trades — under ~100 trades and the result is basically luck.
- Profit factor — above ~2.5 over many years usually means curve-fitting, not genius.
- Equity curve shape — smooth and steady beats a single lucky spike.
- Period consistency — does it survive 2008, 2020 and 2022, or only the easy years?
What’s the first number you look at on a report, and what’s an instant red flag for you?