> For the complete documentation index, see [llms.txt](https://trylevel2.gitbook.io/getting-started/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://trylevel2.gitbook.io/getting-started/technical/backtest-logic-and-execution.md).

# Backtest logic and execution

Well done! If you're reading this article then that means you've backtested at least one of your strategies. If you haven't then we'd highly recommend you test it at least once and then come back to this article for context.

## The Logic <a href="#h_090eda9d23" id="h_090eda9d23"></a>

We've divided the backtest into two categories depending on what your risk appetite is :\
1\. Risk Tolerant\
2\. Risk Averse

By default - The backtest runs on a simultaneous execution mechanism.

### Risk Averse <a href="#h_102547d180" id="h_102547d180"></a>

If you are more risk averse or you do not want to take risk then we recommend you to run backtest on a sequential execution basis.\
​\
​Sequential execution basis\
​

Sequential execution means that a new order only opens if the existing order in the queue has been closed.\
This will result in less number of trades being generated in the report, however, you will get better clarity on key metrics like holding period, and drawdown. Additionally, we categorise this into Risk Averse category since the exposure at a time is limited to the Stoploss calculated by the strategy.

### Risk Tolerant <a href="#h_029e2433bc" id="h_029e2433bc"></a>

Simultaneous execution means that a new order opens whenever a signal is generated. Doesn't matter what the status of the previous order(s) is.

\
This will result in high number of trades being generated in the report, however, you will get less clarity on key metrics like holding period, and drawdown. Additionally, we categorise this into Risk Tolerant category since the exposure at a time can be maximum (100% capital allocated to the strategy/open orders).