KingdomEdge Algo · Backtest Validation Document

Detailed Methodology, Results, and Forward Validation Plan

This document expands on the headline backtest numbers (61.3% / 2.75 / +47.1R / 6.3R) with full transparency on the test design, assumptions, limitations, and the forward-validation work currently in flight. It is intended as a companion to the slide deck and the kingdomedgealgo.com /methodology page — not a replacement.

Executive Summary

A 62-trade backtest of the KingdomEdge Algo system on SOXL (3x Semiconductor ETF), 1-hour bars, January 2024 through April 2026 (28 months), produced:

61.3%
Win Rate
2.75
Profit Factor
+47.1R
Net Return
6.3R
Max Drawdown

These results are indicative, not definitive. A single-ticker, single-timeframe backtest is the floor of the evidence required to validate a system, not the ceiling. We treat this test as one data point in a multi-source validation effort — supplemented by live forward tracking, expanded universe testing, and methodology transparency. This document walks each number through what it means, what it assumes, and what it doesn’t tell you.

What was tested

Parameter Value Notes
SymbolSOXLDirexion 3x Semiconductor ETF — leveraged, high-volatility
Timeframe1 hourSingle timeframe; no multi-timeframe confirmation in this test
PeriodJan 2024 – Apr 202628 months; covers a mix of trending and choppy regimes
Trades62 closed positionsBoth directions per Decision Matrix output
ConfigurationDefault preset + Zone Proximity FilterStandard SurgeU Surge Strategy parameters
Risk Model1R per trade, fixed-R sizingPosition size adjusted so each trade risks 1R
SlippageNot modeled in this versionReal fills will deviate; see “Limitations”
CommissionsNot modeled in this versionSee “Limitations”
FillsAssumed at exact entry/stop/targetSee “Limitations”

SOXL was selected because it represents a high-volatility instrument where setup quality is most testable. A choppy, low-volatility instrument would generate fewer signals; a steady mover would produce easier wins. SOXL is a stress-test environment.

How the system makes a trade decision

Each trade is the product of the SurgeU 6-step Surge Strategy, applied automatically by the KE Algo indicator stack:

  1. Set Curve — KE Curve confirms direction at the high timeframe (HTF)
  2. Check Trend — KE Trend confirms direction at the intermediate timeframe (ITF)
  3. Identify Zones — KE Zone identifies a fresh Supply or Demand zone at the low timeframe (LTF)
  4. Score Trade — Odds Enhancer scorecard tallies 6 factors (Strength, Time, Freshness, Trend, Curve, Profit Zone) for a 0-10 score
  5. S.E.T.S. Trade — entry signal fires only when score is above 7 (Confirmation Entry threshold) or above 8 (Proximal Entry); pre-calculated Stop, Entry, Target, Size
  6. Place Order — order routed (in live trading via cloud bot to IBKR; in backtest, simulated at the calculated levels)

Critical: the backtest only counts trades where Steps 1-4 all aligned and the score crossed the threshold. The 62 trades are not the universe of signals on the chart — they are the universe of high-confidence setups the methodology said to take. Lower-confidence setups (LOW grade, score <7) are excluded by design.

The four headline numbers, explained

61.3%Win Rate

38 winning trades, 24 losing trades.

What it means: Above the 50% break-even line, leaving room for the strategy to be profitable even if win rate softens by a few percentage points. Win rate alone is not a measure of profitability — a 90% win rate with tiny wins and huge losses is a losing strategy. Win rate matters in combination with the average win-to-loss ratio.

What it doesn’t mean: It does not mean future trades will win 61.3% of the time. Win rates fluctuate. A 95% confidence interval on 62 trials with a true 60% rate runs roughly 47%-72%. Future student results will be inside that band, not on the point.

2.75Profit Factor

Total winnings ÷ total losses = $2.75 / $1.

What it means: For every dollar lost across all losing trades, the system earned $2.75 across winning trades. This is the most important headline number because it captures the win/loss asymmetry that a flat win rate misses. A profit factor above 1.5 is generally considered “good”; above 2.0 is “strong”; above 2.5 means the strategy has substantial cushion.

What it doesn’t mean: Profit factor is path-dependent. A series of small wins followed by one large loss can drag profit factor below 1.0 quickly. The current 2.75 is a snapshot of this 28-month window — a different window could yield a different number. Forward live tracking will tell us the durable value.

+47.1RNet Return

Cumulative R-multiple result over 62 closed positions.

What it means: With 1R risk per trade, after 62 trades, the system was up the equivalent of 47.1 risk-units. If a student risked $100 per trade, that’s roughly $4,700 net over the 28 months — before commissions, slippage, taxes. If a student risked $500 per trade, roughly $23,500 net. The metric is denomination-independent — that’s the value of R-multiples.

What it doesn’t mean: Real-world R is degraded by slippage, commissions, missed fills, and behavioral execution gaps. Conservative live results would be expected to be 70-85% of backtest R, not 100%. We expect students to see roughly +33-40R over a similar period if they execute disciplined.

6.3RMax Drawdown

Largest peak-to-trough decline from any high-water mark during the test.

What it means: The worst losing streak cost 6.3R. If a student risked $100/trade, that’s a $630 drawdown at the worst point. A student needs to have psychological and capital tolerance for 6.3R drawdowns — and the live experience will likely produce drawdowns at least 1.5-2x worse than backtest. So plan for ~10-12R drawdowns in real trading.

What it doesn’t mean: It is not the largest drawdown students will ever see. It is the largest drawdown observed in this specific window. Future drawdowns can and will be larger. The Core/Pro/Ultimate tier ladder (Core = learn, Pro = paper-practice, Ultimate = automate) is structured precisely so students experience drawdowns on paper before they put real capital at risk.

Key assumptions and what they hide

The backtest as currently configured makes several simplifying assumptions worth surfacing:

  1. No slippage modeled. Real fills will be a few cents to a few dollars off the calculated price, especially on a leveraged ETF like SOXL. Conservative live R is expected to be 70-85% of theoretical R.
  2. No commissions modeled. At $0.65/contract or $1/trade for stocks, this is small ($60-130 over 62 trades) but real.
  3. Perfect signal identification. The backtest assumes the indicator’s signal would have been seen and acted on at the exact bar close. In live trading there’s a few-second delay; on a 1h bar that’s usually negligible.
  4. Single instrument, single timeframe. Performance across instruments and timeframes will vary. The 35-ticker screener (live on TradingView) is the path to broader validation.
  5. No volatility regime stratification. Trending markets and choppy markets produce different results. The 28-month window includes both; we have not yet broken the data into regime sub-periods.
  6. No Monte Carlo or walk-forward. Both are standard rigor checks. We have not yet run them. They are on the validation roadmap.

Honest limitations of the current test

What this backtest is NOT

  • A guarantee or even a strong predictor of future returns
  • A multi-instrument validation (only SOXL)
  • A multi-timeframe validation (only 1h)
  • A statistically large sample (62 trades is suggestive, not conclusive)
  • A walk-forward or out-of-sample test
  • Adjusted for selection bias

What it IS

  • A real-money methodology applied to real historical price data
  • A 28-month period that covers diverse market regimes
  • Output of the same indicators currently live on TradingView for students
  • Reproducible — anyone with access to the indicators can replay the test
  • A reasonable starting point for a multi-pronged validation effort

Forward validation — what’s in flight now

To address the limitations above, the validation roadmap is:

Currently live

  • 35-ticker KE Screener on TradingView — applies the same Surge Strategy in real time across a diverse universe (large-cap tech, financials, healthcare, industrials, defensives).
  • Live signal tracking — every signal generated by KE S.E.T.S. Trade is logged with entry, stop, target, score, and outcome.

In flight (next 30-60 days)

  • Expanded backtest universe — replicate the SOXL test on 5-10 instruments with mixed volatility profiles
  • Multi-timeframe validation — 15m, 1h, 4h, daily on the same universe
  • Walk-forward analysis — train on 2024 data, test on 2025-2026; then roll
  • Monte Carlo robustness — randomize trade order to test path-dependence

Pilot validation (post-NDA)

  • SurgeU student paper-trading cohort — 5-15 students using KE Pro tier on paper accounts for 60-90 days, results published. The most credible forward signal because it’s actual humans executing real trades in real markets.

What this means for SurgeU students — the honest version

If you’re considering whether to recommend KE Algo to your students, here’s the honest read:

  • The backtest is encouraging, not definitive. A 2.75 profit factor with controlled drawdowns over 28 months is a real signal. But one ticker and 62 trades is not bedrock evidence.
  • Live performance will be softer than backtest. Expect 70-85% of theoretical R after slippage, commissions, and behavioral execution gaps.
  • The methodology is auditable. Every trade decision can be traced to the 6-step Surge Strategy and the Odds Enhancer scorecard. There’s no black box.
  • The pedagogical ladder protects students. Core teaches the framework, Pro lets students practice on paper, Ultimate routes to broker only after students have earned the confidence. Drawdowns hit paper accounts first.
  • Forward validation will determine durability. The numbers presented here are a foundation, not a finish line.

This document represents one student-facing read of the backtest evidence. Numbers are accurate to the underlying TradingView strategy tester output as of 2026-04-23. Past performance does not guarantee future results. Backtests reflect historical price behavior under specified configurations. KingdomEdge Algo welcomes detailed scrutiny of the methodology and the validation work in flight.

Compiled on 2026-05-08.