Historical test result
When 2,600 trades a year still did not cover costs
If you judge a test by how often it traded, check the costs first: this one covered only 16% of them. A high count can hide a small win and a large bill.
What many traders believe
It’s tempting to think that more trades make small gains add up. A busy backtest, or historical simulation, can make that feel true. Work feels like progress, so a busy chart feels right. You ran many trades and you want that work to mean kept money. But count tells you how often you tried. It does not tell you what stayed after trading costs. I looked at one busy test to see what was left after costs.
What this historical test showed
The European leg had a small real plus before costs, but it covered only about 16% of its trading costs over 2,600 trades a year. That finding is for this leg only. The test covered EURUSD and GBPUSD in 2017-2022 at about 2,600 trades a year. Gross result means trading P&L before costs, including losing trades. Net means what is left after costs. Here the gross result before costs was small and positive and the modeled round-trip trading costs were larger, so the leg lost after costs.
What gross result means in your own report
Gross result is your trading P&L before costs, including losing trades. It is not the winning-trades-only Gross Profit field some reports show. Do not use that winning-only field here. It leaves out losing trades, so it overstates what was made before costs. Use the full P&L before costs for the same period as your cost total. Subtract costs only when your gross result does not yet include them. If your report already took costs out, do not subtract again.
Say your backtest makes $16 before costs and spends $100 over the same trades. That leaves an $84 loss. If your written daily loss limit is $75, the $84 would exceed it if it all happened on one day. These are example numbers; the 16% from the historical test tells you nothing about which day a loss fell on.
Why count is a poor stand-in for kept money
A backtest report can impress you with activity. Fees look small on one trade and add up across thousands of tries. That is why I look at what survives fees, not at how busy the test was. In this historical test the gross result before costs covered only about 16% of trading costs for this leg. Your own report will have its own numbers, so do not borrow this share. Compare your own gross result before costs with your own cost total for the same trades.
A separate risk check you should still run
Costs are one check and open trades are another. Open your backtest equity curve, where equity is the account value including open trades. See how far that line falls while trades are still open. A plan can look calm on closed trades and fall far while open. I keep this apart from the cost check. First see if gross result before costs covers costs. Then look at the equity curve including open trades.
What I would do
I would never pay a challenge fee for a plan like this before I see costs covered in the test. I want gross result before costs to clear costs and leave space. A small plus before costs does not clear that bar for me. I would set this plan aside and check whether the other tests cover their own costs.
Check your own report
In your report, divide the full result before costs by total costs for the same trades; a number below 1 means costs were higher. Use the same period for both and keep losing trades in the gross result. If your report already subtracts costs, do not subtract again. Then open the equity curve including open trades as a separate risk check.
Limits
This is a historical test, not a live account. The scope here is the European leg on EURUSD and GBPUSD in 2017-2022, at about 2,600 trades a year. The 16% cost cover and the loss after costs belong to that leg and that period only. Other hours, markets, or periods can look different.
Try the free Prop Rule Guard at https://stratcorealpha.com/rule-guard?ref=website.