Back testing is it of any value?

[Tuffty]

Greying Surfer. Absolutly correct when you say there is no difference between backtesting and the application of experience in real time. They are both applying 'rules' to the market place in order to create an edge. There are loads of reasons why backtesting may not work if used badly (ie curve fitting, market bias, too little data, slippage, optimization etc).

 

[adrianallen99]

Im currently backtesting a system that ive devised. The system is based on weekly entry points to FTSE, DOW and NASDAQ.

I can manipulate the results to give me much higher success rates, or I can adjust it to give higher profits but higher risk. Back testing has helped me to work out which stops and limits provide the best risk/return from past performance. For example from backtesting I established that increasing the stop to a 15 or 20 (from 10 point stop-loss) provided far more profit at a risk of higher losses. A paper test last week a 20 point stop gave me 30 more points than gain than a 10 point stop.

My backtest help me established the best stops and limits. Once Ive esthablished the most reliable system, I would stick to it, that way you take out the emotion side of the trade which always loses me money.

 

[Grey1]

adrian,

Once your project finished and you were well happy with your result using historical data, I suggest you to forward test it on some out some sample data to judge its performance..

I strongly suggest not to trade your £££££ well until you are 100% convinced of its performance in real time ...

You might get some surprises..

 

[adrianallen99]

Thats what Im doing. I have only forward tested it for just over a week.

 

[OverseasFOREX]

Are there any intraday Forex historical charts on the web that can be used for backtesting? Thank you.