Backtest

[Btrader]

Hi everyone! A newbie here wanna ask a very simple question, what do backtesting means and how will it help on trading? I always heard about it and i just want to have an overview about it..

Thanks!

[harold_hsu]

here's an article that may answer your question...

http://ezinearticles.com/?Best-Forex-System---Beware-of-Backtesting!&id=914438

[derrekmay]

Backtesting can help you to see if your system is profitable in the past.
However these backtesting results aren't 100%.
Annyway it's a great way to test out a system but you still have to test it live on a demo account before you start throwing the big bucks into it.

[mrgreen]

There are many that believe backtesting means absolutely nothing. It is an unfortunate fact that your broker will not let you trade the past. Forward testing should be done after a quick backtest - IMHO don't waste a whole lot of time in the past...

Good trading to you.

Originally Posted by Btrader

Hi everyone! A newbie here wanna ask a very simple question, what do backtesting means and how will it help on trading? I always heard about it and i just want to have an overview about it..

Thanks!

[Ravique]

There is a guy, his name is Nick Beluck (nickname is Beluck) he is a coder, and he states that you can get a correct backtest if the expert is coded properly.
But ost of the EA's are coded properly to work live but aren't to backtest properly. You can google his nickname together with word backtesting or metatrader backtesting and search for his posts on this topic, he posts a lot on different forums.

It is easy to check whether your backtests are correct or not. Run a backtest in metatrader, then look at the log and pick out 10 most profitable positions, 10 biggest losers, and 10 random positions. Or if you have less then 30, pick all of them. Then open the charts, apply the rules or indicators you use and handcheck all the positions stated in a backtest.

You can never be too cousios when it concerns you money or income.

[oilfxpro]

Hi

Backtests do not reflect the real world.If a broker increases his spread during periods of high volatility from 3 pips to 15 pips ,back tests will only show the last bid offer based on penultimate price.

If u get a bucket shop increasing spreads 10 times a month and a trader pays 10 pips extra per trade *50 % of the time = 50 pips loss in real trading.This is not shown in back tests of data provided by broker

Other factors include corrupt data,computer breakdowns and internet connection failure

Best to live test on 0.01 lots on real account



OILFXPRO

[derrekmay]

Originally Posted by oilfxpro

Hi

Backtests do not reflect the real world.If a broker increases his spread during periods of high volatility from 3 pips to 15 pips ,back tests will only show the last bid offer based on penultimate price.

If u get a bucket shop increasing spreads 10 times a month and a trader pays 10 pips extra per trade *50 % of the time = 50 pips loss in real trading.This is not shown in back tests of data provided by broker

Other factors include corrupt data,computer breakdowns and internet connection failure

Best to live test on 0.01 lots on real account



OILFXPRO

You are correct!
A backtest can be used only to see if you have potential in your system.
If your backtest is profitable then you should go further with your developped system and try it out on a demo.
If you want to have a winning system you have to put allot of time and effort in it.

[SecheKrate]

here is a good article about the dangers of backtesting
The Dangers of Backtesting Forex | NiaTradingSignals

[sweetpip]

Originally Posted by Btrader

Hi everyone! A newbie here wanna ask a very simple question, what do backtesting means and how will it help on trading?

Backtesting is the process of testing a trading strategy on prior time periods. Backtesting a theory assumes that what happens in the past will happen in the future, and this assumption can cause potential risks. It can provide plenty of valuable statistical feedback about a given system that's why most technical-analysis strategies are tested with this approach.

Originally Posted by derrekmay

Backtesting can help you to see if your system is profitable in the past.
However these backtesting results aren't 100%.
Annyway it's a great way to test out a system but you still have to test it live on a demo account before you start throwing the big bucks into it.

Very true!

The result of backtesting offers statistics that can be used to gauge the effectiveness of the strategy but then past performances does not necessarily guarantee good results always.. Not always a hundred percent accurate. So make sure to try it out first before going live.

Good luck!

[FerruFx]

Originally Posted by sweetpip

Backtesting is the process of testing a trading strategy on prior time periods. Backtesting a theory assumes that what happens in the past will happen in the future, and this assumption can cause potential risks. It can provide plenty of valuable statistical feedback about a given system that's why most technical-analysis strategies are tested with this approach.



Very true!

The result of backtesting offers statistics that can be used to gauge the effectiveness of the strategy but then past performances does not necessarily guarantee good results always.. Not always a hundred percent accurate. So make sure to try it out first before going live.

Good luck!

In my opinion, backtesting is worthless for its results.

There's only 2 ways the backtester is usefull:

1. For coders who wants to test the logic of their coding.

2. To observe how an indicator react with the market movement (example to see if it repaint).

About results, keep in mind that in backtesting, you won't have all the "hunting" issues from brokers. No spread spike, no stop hunt, etc ...

This is what makes backtesting and live results so different.

FerruFx