Verification Methodology
Every strategy on Nhuga must earn its status. These are the exact rules we use to promote strategies from Incubation to Verified and from Verified to Elite. No exceptions, no shortcuts.
Incubation
Strategies enter live-market testing after passing internal research and backtesting standards. This is the proving stage — no guarantees of promotion.
Verified
A strategy that has completed incubation and demonstrated that its performance, risk, and behavior meet our predefined standards in live markets.
Elite
A strategy that has shown strong historical performance through applicable backtest, live incubation, and sustained live-performance requirements. A strategy can be promoted directly from Incubation to Elite if it exceeds the Elite criteria.
Incubation → Verified Promotion
A strategy must pass all mandatory criteria and satisfactorily meet the calibration and review criteria below to be promoted from Incubation to Verified status.
| # | Criterion | Rule | Status | Purpose |
|---|---|---|---|---|
| 1 | Minimum Incubation Period | 30 calendar days minimum | Mandatory | Ensures the strategy experiences real market conditions over sufficient time |
| 2 | Minimum Live Trades | 10 completed trades minimum | To Calibrate | Prevents promotion based on an extremely small sample |
| 3 | Live Net Return | Positive net return at end of incubation | Mandatory | Strategy must demonstrate actual profitability in live trading |
| 4 | Maximum Daily Drawdown | ≤ 5% | Mandatory | Controls daily risk |
| 5 | Maximum Overall Drawdown | ≤ 10% during incubation | Mandatory | Controls cumulative risk |
| 6 | Live Profit Factor | ≥ 1.20 | To Calibrate | Ensures gains meaningfully outweigh losses |
| 7 | Live vs Backtest Behavior | No material/unexplained deviation from expected behavior | Mandatory | Confirms the live strategy behaves like the tested strategy |
| 8 | Trade Frequency | Within an acceptable range of backtest expectations | Mandatory | Detects abnormal live behavior |
| 9 | Win Rate | Within an acceptable deviation from backtest | Review | Helps detect strategy degradation |
| 10 | Average Trade | No material unexplained deterioration | Review | Detects weakening edge |
| 11 | Maximum Consecutive Losses | Within an acceptable range of historical expectations | Review | Measures behavioral consistency |
| 12 | Single-Trade Dependency | No single trade should account for >50% of total live profit | To Calibrate | Prevents one lucky trade from validating the strategy |
| 13 | Execution Integrity | No material system/execution errors affecting results | Mandatory | Ensures we're evaluating the strategy, not technical failures |
| 14 | Discretionary Intervention | No manual intervention in strategy decisions | Mandatory | Keeps the live test objective |
| 15 | Data Integrity | All live trades/P&L/drawdown data must be accurately recorded | Mandatory | Ensures the verification is based on reliable evidence |
| 16 | Final Verification Review | Nhuga reviews the completed incubation results before promotion | Mandatory | Prevents automatic promotion based only on raw metrics |
Promotion to Elite
Elite status requires meeting a higher performance benchmark while maintaining strict risk and consistency standards. A strategy can reach Elite directly from Incubation or progress from Verified.
| # | Criterion | Rule | Status | Purpose |
|---|---|---|---|---|
| 1 | Minimum Live Period | Minimum 30 calendar days in live incubation | Mandatory | Gives the strategy meaningful live-market exposure |
| 2 | Minimum Live Trades | Minimum 10 completed trades | To Calibrate | Prevents exceptional results from a tiny sample |
| 3 | Live Return | Must exceed the Elite Return Benchmark | Mandatory | This is what makes the promotion exceptional |
| 4 | Profit Factor | Must meet the Elite PF benchmark | Mandatory | Confirms quality of profits |
| 5 | Maximum Daily Drawdown | Must remain ≤ 5% | Mandatory | Protects against excessive daily risk |
| 6 | Maximum Overall Drawdown | Must remain ≤ 10% during incubation | Mandatory | Ensures exceptional return isn't produced through excessive risk |
| 7 | Consistency | Performance cannot be primarily generated by one trade or very short period | Mandatory | Prevents statistical outliers |
| 8 | Single-Trade Contribution | No single trade should account for an excessive portion of total profits | To Calibrate | Prevents one lucky trade from triggering Elite |
| 9 | Live Trade Distribution | Profits should be distributed across a meaningful number of trades/periods | Review | Establishes repeatability |
| 10 | Live vs Backtest Behavior | No material unexplained deviation in core strategy characteristics | Mandatory | Confirms the live strategy still behaves as expected |
| 11 | Execution Integrity | No material technical/execution errors affecting results | Mandatory | Separates strategy performance from infrastructure errors |
| 12 | Rule Compliance | No discretionary/manual intervention | Mandatory | Keeps the incubation test objective |
| 13 | Risk Stability | No abnormal deterioration in risk characteristics | Mandatory | Elite cannot be achieved through temporary uncontrolled risk |
| 14 | Final Elite Review | Nhuga performs a final quantitative + qualitative review | Mandatory | Prevents automatic promotion from a single metric |
Status Legend
Mandatory
Must be met. Failure blocks promotion regardless of other metrics.
To Calibrate
Threshold is set but may be adjusted as we gather more live data across strategies.
Review
Evaluated during the final review. Material deviation may block promotion at Nhuga's discretion.
Important Notes
- Strategy status is not permanent. If performance or risk characteristics deteriorate, a strategy can be demoted or retired.
- A strategy that fails during its initial incubation does not simply get recycled back into incubation.
- "To Calibrate" thresholds are published as proposed values. As more strategies complete the incubation process, these thresholds may be refined.
- Past performance — whether in backtesting or live incubation — is not indicative of future results. Trading involves substantial risk of loss.
Last updated: August 31, 2026. These criteria apply to all strategies entering or currently in incubation. See our full disclaimer for important risk disclosures.