Long & Short Strategy Backtesting

Long and short strategy backtesting allows traders to evaluate strategies that can take positions in both rising and falling markets. With Backtestra, traders can test directional and bi-directional strategies using historical market data to assess performance and risk.

What Is Long & Short Backtesting?

Long and short backtesting simulates strategies that open long positions to benefit from rising prices and short positions to profit from declining prices.

These strategies are commonly used in derivative markets and are designed to adapt to changing market conditions.

Why Long & Short Strategies Require Backtesting

While long and short strategies offer flexibility, they also introduce directional and execution complexity.

Backtesting helps traders evaluate:

Performance in bullish, bearish, and sideways markets
Risk asymmetry between long and short positions
Strategy behavior during high volatility periods

How Backtestra Tests Long & Short Strategies

Backtestra simulates directional position changes based on predefined rules and indicators.

Independent logic for long and short entries
Configurable risk parameters per direction
Stop-loss and take-profit rules for both sides
Performance breakdown by trade direction

Long & Short vs Market Neutral

Long and short strategies are not inherently market neutral.

Market neutrality depends on position sizing, exposure balance, and correlation between positions, not merely the ability to go long and short.

Key Metrics for Long & Short Backtesting

Directional win rates
Profit contribution by long and short trades
Drawdowns by market regime
Risk-adjusted performance metrics

Who Should Use Long & Short Backtesting?

Traders operating in derivative markets
Users building adaptive directional strategies
Professionals testing regime-based logic

Long and short strategy backtesting is available in Trader, Professional, and Quant plans, with advanced analytics unlocked in higher tiers.