Key results
- Total return
- -15.3%
- Buy & hold: +2%
- Annual return (CAGR)
- -1.7%
- Buy & hold: +0.2%
- Max drawdown
- -27.6%
- Buy & hold: -27.6%
- Win rate
- 38.42%
- Profit factor
- 0.83
- Trades
- 203
- Longest losing streak
- 10 trades
- Period
- Oct 2, 2016 to Oct 1, 2026
- 10 years
- Market
- GBP/USD
- 1-hour
Equity curve vs buy & hold
Returns year by year
| Year | Return | Trades |
|---|---|---|
| 2016 | +5.9% | 3 |
| 2017 | +2.3% | 16 |
| 2018 | -1.7% | 21 |
| 2019 | -2.3% | 22 |
| 2020 | -3.9% | 25 |
| 2021 | -4.8% | 22 |
| 2022 | -6.7% | 25 |
| 2023 | -7.4% | 22 |
| 2024 | +2.5% | 15 |
| 2025 | +2.4% | 17 |
| 2026 | -1.9% | 15 |
Calendar years, compounded from monthly results. The first and last years can be partial.
Order blocks are a central idea in smart money concepts (SMC) and ICT-style trading: the last opposite candle before a strong impulse marks where large orders sat, and price often reacts when it comes back. Guides such as this smart money concepts overview pair the entry with a structural exit: if price prints a change of character against your position, close the trade. We tested that full loop, entry and exit, on GBP/USD over ten years.
The rules we tested
- Market: GBP/USD, 1-hour candles.
- Period: 2 October 2016 to 1 October 2026, ten years.
- Long entry: price returns to the middle of a bullish order block on the 1-hour chart (first touch of the zone), and the close is above the 50-period EMA.
- Long exit: a change of character (CHoCH) prints on the 1-hour chart and the candle closes below its open.
- Short entry: price returns to the middle of a bearish order block (first touch), and the close is below the 50-period EMA.
- Short exit: a change of character prints and the candle closes above its open.
- Protective stop: 250 pips. No fixed take-profit; the structure exit closes the trade.
- Direction: long and short.
- Costs: 0.02% commission per side, full position size on each trade.
What the backtest shows
The strategy lost 15% over ten years, about -1.7% a year, on 203 trades. GBP/USD itself ended almost flat: buy and hold returned +2%. Both suffered nearly the same maximum drawdown, about 28%.
About 38% of trades won. The average win was about 1.0% and the average loss about 0.75%. With fewer than four winners in ten trades, that payoff is not enough: the profit factor came out at 0.83, meaning the strategy won back only about 83 cents for every dollar it lost. The longest losing streak was ten trades.
The exit did nearly all the work: 193 of the 203 trades closed on the change of character signal, and only 10 reached the 250-pip stop.
Results by year are small but persistently negative. The short first stretch of 2016 made +6% on three trades and 2017 made +2%, then the strategy lost money every year from 2018 to 2023, and each of those years lost more than the one before, ending with 2023 the worst at -7.4% (7 winners out of 22 trades). 2024 and 2025 made +2.5% and +2.4%, and 2026 is down 1.9% so far.
Losing small is still losing
Commissions here are modest: about 20 trades a year at 0.04% per round trip. The loss comes from the trades themselves, not from fees.
Why it doesn't work here
The entry idea is reasonable: a retest of a zone that launched a strong move, in the direction of the short-term trend. The trouble is the exit. A change of character on the 1-hour chart arrives quickly and often, so trades are closed long before a winning move can grow. Winners end up only a little larger than losers, and a 38% win rate cannot carry that.
GBP/USD also ended the decade almost where it started, a backdrop where trend-following entries have little to ride.
What you could test next
- Replace the structural exit with a fixed target, for example two or three times the risk, and keep the order block entry unchanged.
- Confirm the change of character on a higher timeframe (4 hours) so that minor 1-hour wiggles stop closing trades.
- Filter the entry with a 4-hour trend instead of the 1-hour EMA.
- Try a trending market, such as gold or the Nasdaq 100, with the same rules.
Methodology and assumptions
- Starting capital
- 10,000
- Position size
- 100% of equity
- Commission
- 0.02% per side
- Data window
- Oct 2, 2016 to Oct 1, 2026
- Run date
- October 2, 2026
- No repainting: every signal is computed on closed candles only, so the backtest never acts on a price a trader could not have seen yet.
- Past performance does not predict future results. A backtest is a historical simulation, not a forecast.
Frequently asked questions
What is an order block in smart money concepts?
In smart money concepts (SMC) and ICT material, an order block is the last opposite-colored candle before a strong impulsive move. Traders read it as the footprint of large orders and expect price to react when it returns to that zone.
What is a change of character (CHoCH)?
A change of character is the first break of market structure against the current trend: in an uptrend, price breaks below the last higher low. Many SMC traders use it as an exit signal, closing a trade when the structure turns against them.
What win rate did the order block strategy get on GBP/USD?
About 38% over 203 trades. The average win (about 1.0%) was only slightly larger than the average loss (about 0.75%), which gave a profit factor of 0.83: the strategy lost money overall.
Do order blocks work better with a different exit?
This test only answers for the change of character exit. With it, 193 of the 203 trades closed on the exit signal, so the exit shaped almost every result. A fixed target or a trailing stop is the natural next comparison.
Reproduce it, then change it
Every number on this page comes from the Backtrex engine. Rebuild the strategy in the app, then change the market, the timeframe or a parameter and see whether the result holds.
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