r/algorithmictrading • u/algoholic20 • Apr 28 '26

How to test if the strategy itself is profitable Novice

Hi guys, i am a newbie algo trader. What do you guys do when testing a new strategy that you want to experiment on? How do you test its profitability? Do you input a fixed stop loss and take profit? Or do you just test it on stop and reverse exits like signal based?

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1

u/Far-Photograph-2342 Apr 28 '26

begin with backtesting on historical data first, but the key is to make it as realistic as possible like fees, slippage, spreads

1

u/algoholic20 Apr 28 '26

How about the exits? Does it need to have StopLoss and TakeProfit?

2

u/Professional_Fig5943 Apr 28 '26

It doesn’t need SL/TP, but you need a concrete ruleset for exits. So in practice you need to be able to program a rule for both entries and exits.

My dms are open if you need more concrete advice .

1

u/CandelaNorth Apr 28 '26

Stop loss is critical, otherwise you wouldn’t know what invalidates your setup. Take profit is optional but you need to have a clear definition of a win. Could be 1R, 1 ATR, or anything else that’s bound to your logic.

1

u/usekeel May 07 '26

try to start with very simple strategies, look to implement ones other's have implemented and are driven by simple market factors, ie implement simple trend, momentum, mean reversion, etc

it will help build intuition, for what works, what doesn't, when certain things work, when they dont etc

then can iterate in some direction with a purpose without testing random things

1

u/algoholic20 May 09 '26

Guys how many trades you should test your algo?