Risk management backtesting
Stress-test strategies against historical market crashes. Understand drawdown profiles and validate position sizing before going live.
Drawdown analysis
Understand maximum drawdown, recovery time, and drawdown distribution. Know your worst-case scenarios before they happen.
Stress testing
Test strategies against historical market crashes — 2008, COVID-19, flash crashes. See how your strategy performs in extreme conditions.
Position sizing
Validate position sizing algorithms with historical data. Optimize Kelly criterion, fixed fractional, and custom sizing models.
Why risk management backtesting matters
Most traders focus on returns and ignore risk until it hits them. A strategy with a 40% annual return sounds great — until you discover it had a 60% maximum drawdown. Could you hold through losing more than half your capital? Would your position sizing survive it?
Risk management backtesting answers these questions before real money is at stake. By running your strategy through historical crises, you learn how it behaves under extreme stress. You can measure tail risk, validate that your position sizing algorithms protect capital, and ensure your stop-loss rules actually trigger when you need them.
The difference between risk-adjusted returns and raw returns is the difference between sustainable trading and gambling. Metrics like the Calmar ratio tell you how much return you're generating per unit of drawdown risk — the number that actually matters for long-term survival.
How it works
Define risk parameters
Set your maximum acceptable drawdown, position size limits, and risk-per-trade constraints. These parameters form the guardrails for your strategy.
Select stress scenarios
Choose historical periods to test against: 2008 financial crisis, COVID-19 crash, flash crashes, or specific volatility regimes. Run your strategy through the worst markets in history.
Analyze drawdown profiles
Review maximum drawdown, drawdown duration, and recovery time. Understand how deep your worst losses go and how long it takes to recover.
Optimize and validate
Adjust position sizing, add stop-loss rules, or modify allocation weights. Use the version tree to compare risk metrics across strategy variations.
What you get with Tektii for risk management
Related resources
Frequently asked questions
What historical crises can I stress-test against?
Tektii provides historical data going back over 10 years, covering the 2008 financial crisis, 2015 flash crash, 2020 COVID-19 crash, and various sector-specific downturns. You can also define custom date ranges to test against any market regime.
How does Tektii calculate maximum drawdown?
Maximum drawdown is calculated as the largest peak-to-trough decline in your portfolio value during the backtest period. Tektii tracks drawdown continuously and reports both the magnitude and duration, including time to recovery.
Can I test different position sizing algorithms?
Yes. You can implement and compare fixed fractional sizing, Kelly criterion, volatility-based sizing, or custom algorithms. Use the scenario comparison feature to see how different sizing approaches affect your risk-adjusted returns.
What risk metrics does the analytics suite provide?
The suite includes Sharpe ratio, Sortino ratio, Calmar ratio, maximum drawdown, value at risk (VaR), win rate, profit factor, and detailed P&L attribution. You can view these at the strategy, scenario, or individual trade level.
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