How Backtest Capital and Trade Size Affect Return Metrics

Summary

A short VeighNa community discussion asks whether performance statistics are calculated from total account capital or from the capital associated with the traded instrument. The poster observes that when starting capital is large relative to fixed order sizes, annualized return and maximum drawdown may differ even if the equity curve appears similar. The exchange points readers to the CTA backtesting module as the place to inspect the metric calculations.

A reply explains that order quantity is determined by the strategy and that users can adjust trading size to make it dynamic. The discussion therefore highlights that reported metrics depend on both the backtest's capital basis and the sizing rule. It does not provide formulas, a worked example, or a definitive explanation of the calculations, so readers would need to inspect the implementation to determine how a particular backtest treats unused capital and exposure.

Key ideas

• Backtest return and drawdown metrics can depend on the capital basis used in their calculation.
• Fixed order sizes may produce different reported returns when starting capital changes.
• Order quantity is set by strategy logic, and trading size can be adjusted dynamically.
• The discussion points to the CTA backtesting implementation but gives no formulas or numerical example.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.