Freqtrade Backtester

Run backtests on your trading strategies, interpret results, and iterate safely before going live.

What Backtesting Does

Backtesting runs your strategy against historical market data to see how it would have performed. It shows you win rates, losses, drawdowns, and exit reasons — everything you need to decide if a strategy is worth trading with real money.

Download Data

Historical data is cached, so download once and reuse it for many backtests.

⚠️ Download one pair at a time — passing multiple pairs to --pairs can cause errors. Run the command separately for each pair:

docker-compose run --rm freqtrade download-data \
  --exchange kraken \
  --pairs BTC/USDT \
  --timeframe 5m \
  --timerange 20240101-

Replace the pair, timeframe, and timerange as needed. The --timerange format is YYYYMMDD-YYYYMMDD; omit the end date to download through today.

Run a Backtest

docker-compose run --rm freqtrade backtesting \
  --strategy YourStrategy \
  --timerange 20240101-20260101 \
  --export trades \
  --export-filename user_data/backtest_results/my_backtest.json

Replace YourStrategy with your actual strategy class name. The --export trades flag creates a JSON file with detailed trade logs.

Key Metrics

• Win rate — Percentage of winning trades. >55% is decent; >60% is strong.
• Max drawdown — Largest peak-to-trough decline. Keep it <20%; above 25% indicates excessive risk.
• Sharpe ratio — Risk-adjusted return. >1.0 is acceptable; >2.0 is excellent.
• Avg profit per trade — Average win/loss size. Wins should be larger than losses.
• Exit reasons — Breakdown of why trades closed (ROI, stop-loss, trailing stop, etc.).

The Key Insight

High win rate ≠ profitability. A 70% win rate with 5% average loss per trade loses money. A 40% win rate with 2% average wins and 1% average loss is profitable. Control your losses; the wins take care of themselves.

Example: A strategy with tight stops (-3%) outperforms one with loose stops (-7% or -8%), even if the loose version has more winners.

Iteration Pattern

1. Run a backtest on a fixed time period (e.g., 6 months of data).
2. Change one parameter (e.g., RSI threshold, stop-loss percentage).
3. Backtest the same period again.
4. Compare results — did it improve?
5. If yes, keep it; if no, revert.
6. Repeat until satisfied.

Always test across multiple market conditions (bull runs, bear markets, sideways consolidation) before going live. A strategy that works in one environment often fails in another.

Environment Variables

Freqtrade reads secrets from environment variables at runtime. Use the double-underscore format:

export FREQTRADE__EXCHANGE__KEY=your-api-key
export FREQTRADE__EXCHANGE__SECRET=your-api-secret

In your config.json, set these fields to empty strings:

{
  "exchange": {
    "key": "",
    "secret": ""
  }
}

Freqtrade will populate them from the environment at startup.

References

• Reading Results — references/reading-results.md
• Iteration Guide — references/iteration-guide.md