Everything you need to know about
backtesting
What you need to know before you define your trading strategy.
‘Thanks, Paul, your videos on Backtesting are great’ Amy, Bristol
Step 1
Backtesting with
forex tester 5
Start with defining the currency pair, the timeframe and the time period you want to use. We have attached a screenshot for you to see what it looks like.
Step 2
Access
previous data
You will get access to your previous data with the option to download them.
Step 3
Add your
Indicators
Next up, add your indicators. All you need to do is select “Add Indicator” and choose the ones you use for your trading.
Step 4
Start
testing
Lastly, select the right timeframes and click “Start Test”. All historical data will play back on your screen.
You can pause, rewind and fast forward to reach a point where your strategy would indicate a trade. Once done, enter a dummy trade with stop loss and take profit levels.
Step 5
Get
synopsis
of the results
After the test is completed, forex tester 5 will give you a synopsis of the results. It will look similar to this.
It will also provide you with a detailed breakdown with the option to paste it into your own spreadsheet.
Top
5 golden rules
for back-testing
- DO NOT cheat. The test works to tell you whether something works or not. It is not there to prove your strategy is bullet-proof.
- DO define your strategy as tightly as you can.
- DO NOT take one test as gospel truth. It takes a couple to get it right!
- DO take your time with the analysis. There is no rush!
- DO NOT be afraid to change the strategy and start again from the beginning. Even the best traders don’t get it right the first time!
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