Net profit versus buy and hold

This is the first thing to check after you have confirmed that the average trade is greater than the required absolute minimum to cover all trading costs. Buy and hold means that we buy the same quantity of the currency that we use in backtest, hold the position for the entire period of the backtest, and then look at the final profit and loss (PnL), on the last bar of the price time series. In our case, we should buy 10,000 AUD/USD, hold it for approximately 3 years, and look at the return from this single trade.

I recommend comparing not only the net profits of the strategy and buy and hold but also the equity curves: this will give us an idea about the change in the equity over time in both scenarios.

Let’s quickly create the equity curve of a buy-and-hold strategy. As you remember, we isolated the trade logic into a separate function, tradeLogic(), so we only should rewrite the part between the Trade logic starts here and Trade logic ends...