- 01
Every backtest starts with a rule that looks right: buy when RSI(7) drops under 30, sell when it climbs over 70.
RSI(7) under 30 buys · over 70 sells · stop 1× ATR · target 2R
- 02
Price does what price does. Here is the series the rule has to read, with its RSI under it.
- 03
The rule fires five times: two buys, three sells, each on the bar after its crossing.
- 04
Every trade risks one ATR to make two. Price decides the rest: some reach the target, some hit the stop.
- 05
Two of five reach the target: 40%. Good? With a target twice the stop, chance alone gets one in three.
5 tradesHit target2 · 40.0%
Chance at 2R33.3%
- 06
At real scale, the archetype of a popular free EA didn’t beat chance: 70.3% against 71.4%, over 2,225 trades. That’s check 3 of 8, run alone in 1.3 seconds.
At real scale · 2,225 tradesHit rate70.3%
Chance71.4%
Does not beat chance