Question 1

Why can't I just backtest a chart pattern I see?

Accepted Answer

A pattern you recognize by eye is not yet a rule a computer can replay. Until entry, exit, and risk are written so the same conditions trigger the same action every time, there is nothing precise to test, and your eye will quietly cherry-pick the good examples.

Question 2

What is the minimum a rule set needs before testing?

Accepted Answer

At least a defined entry, a defined exit, and a risk amount per trade. Filters and failure conditions make the test more honest, but with no entry, no exit, and no risk, a backtest has nothing concrete to measure.

Question 3

Are failure conditions the same as a stop loss?

Accepted Answer

Not quite. A stop loss is one exit on a single trade. A failure condition describes when the whole idea should be considered broken, for example a market regime where it stops working, so you know in advance what would make you abandon it.