Backtesting, Journaling & Ignoring Noise | OVTLYR UNIVERSITY Lesson 6
Introduction
Great traders don’t guess. They test. This lesson shows you how to backtest your trading strategy and how to journal your trades so you can track what works—and cut what doesn’t.
1. What Is Backtesting?
● Definition: Looking back at past price data to see how a strategy would have performed.
● Goal: Identify repeatable setups and patterns that lead to high-probability trades.
● Mindset: You are not predicting. You are studying.
2. How to Backtest Properly
A. Choose a Setup
● Example: OVTLYR Buy Signal
● Define the exact conditions:
○ Trend structure
○ Breadth alignment
○ Price action
○ Sector strength
B. Scroll Back on the Chart
● Don’t look at what happens next—stay on the left edge.
● Find points where the setup would trigger based on your checklist.
C. Mark the Entry
● Where would you have bought it?
● Use a tool like TradingView or Thinkorswim to add notes or shapes.
D. Mark the Exit
● Where would you have exited?
● Could be a structural break, a moving average cross, or another specific rule.
E. Record the Trade
● Win or loss?
● How far did the stock move?
● Were your criteria met clearly?
3. What to Track in Backtesting
● Win rate (% of trades that were winners)
● Average return per trade
● Maximum favorable excursion (how far it went in your favor)
● Maximum adverse excursion (how far it went against you)
● ATR at entry (for stop setting)
● Entry and exit reason
This creates a repeatable process based on data, not hope.
4. Journaling Real Trades
A. Why Journal?
● Keeps you accountable.
● Exposes mistakes and emotional patterns.
● Helps refine your strategy over time.
B. What to Write Down
● Ticker and date
● Reason for entry (based on checklist)
● Entry price and stop
● Outcome (profit/loss)
● Screenshots of before and after
● Emotional state at entry/exit
5. Look for Patterns in Wins and Losses
● Are most losses coming from one type of setup?
● Are you breaking your rules?
● Are winners coming when all checklist items are confirmed?
Use your journal to iterate and improve.
6. Focus on the Process, Not Just the Result
● A losing trade with good execution is still a win.
● A winning trade with a bad process is a time bomb.
● Journaling reveals whether you're trading with discipline.
This concludes Lesson 6. Now you know how to backtest systematically and journal with purpose. In the next lesson, you’ll dive into managing your trades in real time: adjusting stops, booking profits, and handling different scenarios once you're in.
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