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Backtesting is the process of testing a trading strategy against historical market data to evaluate how it would have performed in the past. It helps traders assess the viability of a strategy before risking real capital. Results include metrics like win rate, drawdown, and profit factor.
Before running a moving average crossover EA on a live account, you backtest it on 5 years of EUR/USD data in MetaTrader 5. The results show a 58% win rate and 12% maximum drawdown, giving you confidence to try it on a demo account next.
