Need to consider Position size also during backtest trading systems

How many of us have ‘risk reward ratio’ considered while backtesting a trading system in options ?

Mostly we consider entry rules based mostly based on price action parameters or use various indicators like MA,RSI etc.etc.

However these could work out very well as long as the market volatility is normal and not during the time when volatility ranges are beyond the usual ranges below lets us say ~20 . As we know premiums of options spike to very high before a minor or major event like earnings, budget etc etc. and we would still be getting the best entry signals on such high volatility days but just by not considering the Risk Risk reward and 

In order to make it simple let us say we have 10 lakh capital and 1%  of that (10000/-) u are deploying for a strategy and say your risk for the trade is 1000/- (depending on where and how. you place your stop loss) meaning you would buy only as much quantity of traded instrument within 10000/- and would take loss per trade 1000/- . Now the stop loss could most likely be based on any of the indicators  or pattern high/lows etc and the option premiums for them keep changing depending on volatility in the market.. and same strategy could give signal but risk may vary with volatility. So you may end up taking > 1000/- risk or a cut of trade on 1000/-  both of which could go against you and could surprise your backtest result based assumptions.

Taking stop loss based on ATR indicator could be a solution but that may not be case always for all strategies.

Therefore Position size the entry well or rather ignore if they don’t fit into your risk reward then  all the back testing does not help as mostly the profits your made from your system could easily be taken away in few periods of such days where it becomes crucial to decide how much to sell or why not to trade?

Trading with abnormal premiums with all other signals right does not help trading psychology well and there Is every chance that you get out early or do all other mistakes possible.

Therefore having entry exit and stop loss rules alone does not make your backtesting complete but a plan to the volatility ranges to not trade or reduce position size as well.