Backtesting is a term used in modeling to refer to testing a predictive model on historical data. One of the most important tools in a traders toolbox is backtesting. The purpose of Backtesting a strategy is to use it in a real market in order to find the “Success Rate” of a certain trading strategy. The whole reason for Backtesting and getting a success rate is so that you can use this data to make an informative decision as to whether or not you should use this strategy.
The consistently profitable trader is an expert. Just like a doctor knows what medicine to prescribe for different health conditions, an expert trader knows the markets. When taking a position in the market we enter a battlefield. With the push of a button we are competing with the biggest, best and smartest banks, hedge fonds and institutions.
So how can you make money in the markets, knowing whom you are up against? You must practice your trading. That is the only way to become an expert, it's not easy, but it's simple. Practice makes perfect!
When backtesting you will identify how suitable the trading system is for you, and you will learn to trust your trading system by follow your rules. Backtesting is absolutely necessary if you want to survive in this business long enough to see the returns. If you set your path right, you will make tons of money later. But you have to put in the hard work first.
Happy backtesting and keep it simple!
Forex Tester 4
50% OFF - Save $150
Forex Tester 4 is the latest release of the popular Forex testing software that simulates real trading with historical data giving you the ability to test your trading system before using - and losing - real money because your trading system does not have a real edge in the market.
Whether you are trading a manual system or an automatic system,
Forex Tester is designed to have you set up and testing your
strategies quickly...even if you have never placed a real trade in
live markets. It's that simple.
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