I noticed that some traders use backtesting to evaluate their trading strategies. What I don't understand is: how do they separate the predictive power of their trading strategy from the general market trend when interpreting the backtest results?
For example, long-only trading strategies will likely show good performance during rising markets, even if some of those strategies have no predictive power at all. Similarly for short-only trading strategies during declining markets. There must somehow be a way to remove the effect of market trends if the predictive power of a strategy is to be measured. I imagine that the real life situation is more complex than what I have just illustrated, because some strategies involve both long and short positions (at different times).