# Backtesting Engine Architecture

This document describes the backtesting engine design.

## Backtesting Components

```
Backtesting Engine
    ├──► Data Provider
    │         │
    │         └──► Historical Data Loading
    │
    ├──► Strategy Execution
    │         │
    │         ├──► Data Replay
    │         ├──► Signal Generation
    │         └──► Order Simulation
    │
    ├──► Realism Models
    │         │
    │         ├──► Slippage Model
    │         ├──► Fee Model
    │         └──► Order Book Simulation
    │
    └──► Metrics Calculation
            │
            ├──► Performance Metrics
            └──► Risk Metrics
```

## Data Replay

Historical data is replayed chronologically:

```
Historical Data (Time Series)
        │
        ▼
Time-based Iteration
        │
        ├──► For each timestamp:
        │         │
        │         ├──► Update market data
        │         ├──► Notify strategies
        │         ├──► Process signals
        │         └──► Execute orders
        │
        └──► Continue until end date
```

## Order Simulation

Simulated order execution:

```
Order Request
    │
    ▼
Order Type Check
    │
    ├──► Market Order
    │         │
    │         └──► Execute at current price + slippage
    │
    └──► Limit Order
            │
            └──► Wait for price to reach limit
                    │
                    └──► Execute when filled
```

## Slippage Modeling

Realistic slippage simulation:

```
Market Order
    │
    ▼
Current Price
    │
    ├──► Buy Order: Price + Slippage
    └──► Sell Order: Price - Slippage
            │
            └──► Add Market Impact (for large orders)
```

## Fee Modeling

Exchange fee calculation:

```
Order Execution
    │
    ▼
Order Type Check
    │
    ├──► Maker Order (Limit)
    │         │
    │         └──► Apply Maker Fee
    │
    └──► Taker Order (Market)
            │
            └──► Apply Taker Fee
```

## Performance Metrics

Calculated metrics:

- **Total Return**: (Final Capital - Initial Capital) / Initial Capital
- **Sharpe Ratio**: (Return - Risk-free Rate) / Volatility
- **Sortino Ratio**: (Return - Risk-free Rate) / Downside Deviation
- **Max Drawdown**: Largest peak-to-trough decline
- **Win Rate**: Winning Trades / Total Trades
- **Profit Factor**: Gross Profit / Gross Loss

## Parameter Optimization

Optimization methods:

- **Grid Search**: Test all parameter combinations
- **Genetic Algorithm**: Evolutionary optimization
- **Bayesian Optimization**: Efficient parameter search

## Backtest Results

Stored results:

- Performance metrics
- Trade history
- Equity curve
- Drawdown chart
- Parameter values