Here’s a great article on back testing from our good friend [tag]David Jenyns[/tag], author of the http://www.metastock.ca/training/metastock-programming.aspx - [tag]MetaStock Programming Study Guide[/tag] , available for purchase at: http://www.metastock.ca/training/metastock-programming.aspx - www.metastock.ca/training/metastock-programming.aspx
+-+-+-
Original Article: http://www.makeupblog.cn/real-estate/the-secret-art-of-backtesting.html - www.makeupblog.cn/real-estate/the-secret-art-of-backtesting.html
The Secret Art of [tag]Backtesting[/tag]
If you have not back tested your trading system, you might as well trade with your eyes close.
In fact, whatever technical analysis criterion you use to trade
with, be it [tag]moving averages[/tag], [tag]candle sticks[/tag],
[tag]volatility breakouts[/tag], [tag]fibonacci retracements[/tag] or
any other [tag]trading system[/tag] you have devised you’re going to
need to back test your trading system thoroughly and objectively in
order to remove any possible doubt about it’s capability.
To remove any self-doubt you need to thoroughly back test or
simulate your trading system in such away that it matches the
conditions under which it will be traded. Once you have established
that you have a reliable and robust trading system only then will you
be confident in trading your system.
When trading what is the question in most traders’ mind?
To answer this question I shall quote the introduction from Chapter 8 Back Testing of Mark Jurik’s book Computerized Trading:
Will my trading strategy be profitable? After having gone through
the arduous process of crafting a trading strategy, these are the
questions you must ask yourself. The ability to answer these questions
are the great promises that back testing holds out for all traders. A
successful back testing procedure will greatly reduce the probability
that you will begin trading with either an unprofitable strategy or one
that does not meet your expectations. By adopting a sound and rigorous
back testing approach, you will:
- Pinpoint which approaches to the market that are likely to be successful and which ones are not.
- Generate good estimates of future performance for each trading strategy you test.
- Create a record of your trading strategy’s historical trading performance.
- Produce data necessary for other components of your trading approach such as your asset allocation strategy.
Important [tag]Trading System Criteria[/tag]
Profitability is not the only criteria by which a trading system
should be evaluated. Drawdown and stress should equally be considered
as well… for example, before you open a trading account:
- Are you satisfied that your system is reliably profitable?
- Will draw downs wipe out your account?
- Is your system trading in a way you can tolerate?
- Can you tolerate long periods of no trading or too much trading?
- Can you tolerate a large string of losses?
------------- http://www.carsteering.com/chrysler_laser_steering_box.htm - chrysler laser steering box
|