When constructing a strategy/algo, the first thing I am interested in is finding a signal/ pattern that has some predictive qualities. To do that, I will backtest the strategy with a stop and a limit order that is a multiple of the ATR and where the stop and limit are equal distance from price. For example: entry price: 10 stop: 8 limit: 12 Let's say I have a strategy that has 100 trades and a 75% win rate (I only care about win rate at this point because I am only testing if the signal has predictive qualities). Not being a stats expert, my approach to validate this strategy would be to run a simulation over the same data set (maybe 10,000 iterations) where I randomly select 100 entry points with the same exit criteria and see what percentage of runs beats a 75% win rate. For example, if only 10% of the runs beat my strategy, then I can say the strategy beats random entry 90% of the time. If this approach is valid, what are meaningful percentages (i.e. strategy beats random entry 10%, 20%, 30%). Would be interested on feedback regarding this methodology for strategy validation or some alternatives. All this being said, ultimately, the strategy will have to be validated via live trading.