# How to backtest a strategy in Excel

#### Good summary. This is much more efficient than c…

Rocko Chen - Mar 3, 2011

Good summary.

This is much more efficient than coding + debugging + testing stuff in programming languages e.g. JAVA, Matlab, C++.

Thanks for the comment Rocko - I think what you’ll find is that as the complexity of a model goes up, you may want to look at other approaches as well!

I use the Sharpe Ratio to judge the effectivness of my investments. Arguably, it’s better than looking at the raw investment numbers. I’m also a fan of the Sortino ratio (which penalizes downside volatility). You can download an Excel spreadsheet to calculate the Sharpe Ratio here: http://optimizeyourportfolio.blogspot.com/2011/05/calculating-sharpe-ratio-with-excel.html

I also use Sharpe Ratio . I believe he who uses it will become a fan of the Sortino ratio.

I tend to use the Omega Ratio to asset the risk/reward nature of investments. It’s much more sophisticated than the Sharpe Ratio, but is just as easy to calculate. There’s a guide to calculating the Omega Ratio here