Before executing a trading strategy into the live markets, it must be repeatable, testable, and verifiable. If the testing results prove to have an edge over the market after a large sample size and a drawdown that can be managed through proper risk management, only then the strategy will be implemented into the trading plan to use with live capital.
A tool I have built to test all my strategies is the spreadsheet below. In this spreadsheet, I collect the data that I find most valuable such as the instrument, session, risk to reward, maximum drawdown and much more. Having such information on hand helps alleviate the stress and anxiety of the uncertainty of the markets. Knowing your average drawdown before recovering the account keeps a checkpoint in your head when your system is not performing well in the live markets. Are you sinking lower than your back tested average draw-downs? If so, go back to the drawing board and check if you are executing the strategy correctly. If not, keep trading the plan and treat every trade separately, knowing that your edge will play out and eventually recover to make new equity highs.
Version 3.6
JSA Backtesting Template (v3.6).xlsx
JSA Backtesting Template (v1.1) GOOGLE SHEETS VERSION
The instructions detailed below is for the Microsoft Excel version only, however the Google Sheets version is very similar and has the same way to input data.