resources, Trading Strategies & Tech
Does Your Strategy Survive Brexit, COVID and the 2025 Tariff Shock A Stress Test
08 Oct 2026
Most strategies look great in a backtest. Once you check which dates the test covered, the reason is usually clear: it ran across calm markets with steady trends, normal spreads and no surprises.
Live markets don’t stay calm. Every few years something happens that no indicator saw coming: a referendum result, a pandemic, a tariff announcement that wipes trillions off global stocks in two sessions. Those are the days that end trading accounts. A strategy that has never been tested through one is unproven.
This article runs through three of the most violent market events of the last decade, what each one did to price, and how to stress test your own rules against them before the next one arrives.
Why average conditions hide the real risk
A backtest over five years of data can look robust and still contain only a handful of truly extreme days. Those few days carry most of the risk, but they get averaged into hundreds of quiet sessions and disappear from your headline numbers.
Win rate, profit factor and average R all describe the normal days. They tell you almost nothing about what happens when:
- Spreads widen five to ten times their usual size
- Price gaps straight through your stop loss
- Correlations that normally hold suddenly break
- Volatility doubles or triples in a single session
That means you need to test the extreme days on their own.
Event 1: Brexit (June 23-24, 2016)
Markets went into the UK referendum pricing a “Remain” win. As results came in overnight, GBPUSD fell from around 1.50 to roughly 1.32 in a few hours, a move of about 11% and the biggest one-day drop for sterling in decades. It happened mostly during the Asian session, when many traders were asleep and liquidity was thin.
What it exposed:
- Stops are not guarantees. Many stop losses were filled far below their set level because there was simply no price in between.
- Mean reversion traders got crushed. Anyone buying “oversold” pound dips kept getting run over as the trend continued for days.
- Session filters matter. A strategy that only trades London hours would have avoided the initial collapse, then faced a totally different market the next morning.
Questions to ask your backtest: What happens if you are holding a GBP position into the result? Does your position size survive a 10% gap? Do your entry rules fire again and again into a one-way move?
Event 2: COVID crash (February-March 2020)
From the February 19 peak to the March 23 low, the S&P 500 fell about 34% in just over a month, the fastest bear market on record at the time. The VIX closed above 80 on March 16. In FX, the US dollar spiked as everyone scrambled for cash, and even gold sold off hard in mid-March before starting the rally that took it to new highs later that year.
What it exposed:
- “Safe haven” assumptions failed. Gold and the yen didn’t behave the way textbook correlations suggested, at least for the first few weeks.
- Volatility-based stops ballooned. ATR-based stops became so wide that a fixed-risk position size shrank to almost nothing, or traders who ignored ATR got stopped out on noise.
- Trend followers did well, eventually. Strategies that let winners run caught huge moves, but only if they survived the whipsaw at the start.
Questions to ask your backtest: Does your strategy keep trading when daily ranges triple? Does your risk per trade stay constant, or does it drift higher when volatility rises? How deep is the drawdown in March 2020 compared to your worst “normal” month?
Event 3: The 2025 tariff shock (April 2025)
On April 2, 2025, the US announced sweeping tariffs on almost every trading partner. Over the next two sessions the S&P 500 lost around 10%, one of the sharpest two-day declines since 2020. Then on April 9 a 90-day pause was announced and the index jumped roughly 9.5% in a single day. Unusually, the dollar weakened instead of rallying as a safe haven, EURUSD pushed sharply higher, and gold went on to set fresh record highs later that month.
What it exposed:
- Headline risk cuts both ways. Short sellers who were right about the crash gave it all back, and more, in one afternoon on the pause news.
- Old correlations broke again. Traders who assumed “risk off means dollar up” were positioned the wrong way.
- Index traders faced huge gaps. US100 and US500 opened far from the previous close several days in a row.
Questions to ask your backtest: Can your strategy handle a 9% reversal against an open position? Do you have a rule for trading, or not trading, around scheduled political announcements? What happens to a short-biased system when the narrative flips overnight?
How to run your own stress test
You don’t need a hedge fund risk desk to do this. If you have never run a structured backtest before, start with this guide on how to backtest a trading strategy, then apply the same process to these crisis windows.
- Pick your crisis windows. Choose a few weeks around each event, for example June 15 – July 15, 2016, February 15 – April 15, 2020, and March 25 – April 25, 2025.
- Trade them blind. The biggest flaw in stress testing is hindsight. If you know COVID is coming, you’ll trade it differently. Ideally, replay the chart bar by bar without knowing the exact date, so you make decisions the way you would have in real time.
- Follow your rules exactly. No discretionary “I would have skipped this one.” If your rules say take the trade, take it. You are testing the rules, not your memory of the news.
- Record more than profit and loss. Track maximum drawdown, longest losing streak, the largest single loss compared to your planned risk, and how many trades were filled with slippage past your stop.
- Compare against your normal results. If your average month has a 4% drawdown and the COVID window shows 25%, your position sizing is built for calm markets only.
- Don’t trust a single path. One historical sequence of trades is just one possible outcome. Reshuffle the order of your crisis trades and ask how bad the drawdown would be if the worst losses had come back to back.
What a passing result looks like
A strategy doesn’t need to make money during a crisis to pass. Many good systems lose during these windows. What matters is:
- The drawdown stays within what you can survive financially and emotionally
- No single trade loses far more than its planned risk
- The strategy recovers once conditions normalise, instead of continuing to bleed
- You can still follow the rules at the worst point of the drawdown
If your strategy fails any of these, that isn’t a disaster. You’ve found the weakness before the market did. Common fixes include smaller position sizes, a hard daily loss limit, avoiding scheduled event risk, or a volatility filter that pauses trading when ranges explode.
The bottom line
Brexit, COVID and the 2025 tariff shock all had different causes and played out differently in the markets. Each one still punished traders whose strategies had only ever seen normal conditions.
The next shock won’t look like any of these three. Testing against all three is still the most reliable way to find out whether your edge holds up when it matters, or only exists in quiet markets.
Tools like FX Backtest let you replay historical charts bar by bar, including these crisis periods, so you can practice trading the worst days of the decade without risking real money.
