Trading · Expert · 13 min lesson
Trading expert capstone: a complete demo-account strategy review
Capstone: strategy one-pager, test evidence, demo log, metrics, sample size, backtest versus demo comparison, compliance and a pre-set decision rule (DRS-4 sections 1 to 8, building on DDS-3). Demo accounts only
What you will learn
- Assemble a complete review package: strategy one-pager, test evidence, demo log, journal and written decision.
- Calculate win rate, average win and loss, expectancy, profit factor and maximum drawdown, and judge them against sample-size uncertainty.
- Compare demo results with the backtest, score rule compliance, and apply a decision rule fixed before the results were known.
Key takeaways
- A complete review has eight sections, from a frozen plan to a decision made with a rule fixed in advance (DRS-4 sections 1 to 8).
- Expectancy is total R divided by trades, and winners alone or win rate alone misstate the edge.
- With about 1.45 R of variation per trade, forty trades give a wide range that can include zero, so the result is inconclusive.
- Compare demo with backtest, explain gaps above a tolerance, and report compliance separately with each breach classified.
- Education only; demo accounts; trading carries a risk of loss and results do not guarantee future results.
Free practice question
Kestrel Demo Desk learner Nadia has traded a demo account for three weeks, is up 5 percent, and sends her reviewer a balance screenshot with the message: ready for live.
What should the reviewer ask for first?
The complete review package: dated plan, test evidence, full trade log, metrics, uncertainty and a decision made with a rule fixed in advance.
Correct. The DRS-4 section 1 to section 8 sequence defines the full package, and a balance screenshot after only three weeks is not evidence of an edge.
Approval, because a profitable account is enough.
Not quite. Section 8 requires a decision from a pre-set rule, and profit over three weeks is within normal variation.
A larger demo balance to test again.
Not quite. Section 3 concerns the quality of evidence, not the size of the balance.
A new strategy with a higher win rate.
Not quite. Section 1 values a frozen plan; changing strategy discards the evidence collected.
Key terms
- expectancy: Average result per trade in R, equal to total R divided by number of trades after costs.
- profit factor: Gross profit divided by gross loss; above 1 means profits exceeded losses in the sample.
- maximum drawdown: The largest fall from an equity peak to a later low in the period studied.
- standard error: Standard deviation of single trades divided by the square root of the number of trades; it measures uncertainty of the average.
- compliance score: Trades that followed the written plan divided by all trades, reported separately from profit.
- breach: A trade or action that broke a written rule, recorded with cause, cost in R and corrective action.
- decision rule: Thresholds for continue, modify or stop, written and dated before the demo period begins.
- slippage: The difference between the planned price and the price actually obtained, a cost per trade.
Official sources
- Bailey, Borwein, Lopez de Prado and Zhu, The Probability of Backtest Overfitting (SSRN)
- ESMA adopts final product intervention measures on CFDs and binary options
Go further
The full lesson has narrated slides, more scenario questions with explained answers and a simulation.
Open the AcademyWatch on YouTubeEducational content, not financial advice. Trading involves risk of loss.