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What’s the right process or best approach to backtestng trade setups and strategies

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As rleplae says, but if interested say in discretionary day trading, then in replay, after initial practice and trying out of ideas, try to be realistic and use a comparable account size, daily loss limit and number of contracts that you intend to or are likely to be able to use when you go live.

Most replay accounts are unlimited in these respects so if you practice without loss limits say and trading many more contracts than you would be able to you are wasting your time in unrealistic and ultimately unhelpful practice. It is very tempting in replay for example to take big losses and double down on trades to dig yourself out of drawdowns in the desire to be green at the end of the day and justify that by saying the extra hours spent replaying are beneficial due to the added screen time trying out ideas. In reality the lack of discipline or testing of a specific defined methodology is quite often just teaching bad habits and impulsive trading.

Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger
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