Backtest Calculations Are Done In The Quote Currency

Let's say all your brokerage accounts are denominated in USD. And let's say you want to backtest the symbol GBP/JPY. With currency, the calculations are done in the "quote" currency, which is the second in the pair (JPY in this case). The problem is converting those profit/loss calculations done in JPY to your home currency of USD. To do that, you need the USD/JPY rate as well.

This can be done while real-time trading (and in fact is done - converting to your account's home currency that is, not necessarily to USD).

But during backtesting it would be an unnecessary pain. You might not have any USD/JPY historical prices, and if you did you might not have enough to cover the entire backtest period.

So, we just do backtesting calculations and reporting using the quote currency. A 100% p.a. profit is good in any currency, and after all it's the annualised percent profit/loss that is important.

This is why the currency of the starting balance changes depending on the symbol you have chosen to backtest.

[I guess you could make a synthetic pair combining GBP/JPY and USD/JPY which simulates always converting GBP/JPY back to USD, and backtest over that synthetic pair instead. But I haven't really thought that through yet].