Backtesting Introduction

October 31, 2009 | By JackieAnnPatterson | Filed in: Backtesting Set Up.

backtesting_intro_jackie_ann_patterson

Click here for my Backtesting video interview at Moneyshow.   It gives an introduction to backtesting and covers two main topics:

What is Backtesting?

In short, backtesting is the process of testing a strategy by describing that strategy as a set of rules and applying those rules to historical price data.   It is often automated by using a software backtesting engine such as StockFinder or TradeStation.

Read this blog’s Backtesting Definition

How to Do Backtesting

Do it Yourself Manually

Tedious, tedious, tedious!   Error-prone too.    The plus side of backtesting manually is that you gain intimate knowledge of each historical trade by looking at it yourself.   The downside of manually backtesting is that it is so time-consuming that its not feasible to back test a large sample size

Automate with Computer Software

Using specialized computer software to do the backtesting speeds up the process considerably.   Automated backtesting is still hard work requiring advanced skills to get it right.   

Hire a Quant

This is the ideal way to get a strategy developed, analysed and backtested. It is the path taken by the large trading firms.    You will compete with them for talent, so you need to be able to pay the big bucks to go this route.

Read BackTesting Report

Backtesting Report  is the easiest, most cost-effective way to get backtesting results.   This is a report of the backtesting that I use to develop my own trading strategies so you know we strive very hard to get it right.   Offering electronic reports and video classes over the web helps keep the costs down to keep it in reach of the average trader or active investor.    To find out about specific Backtesting Reports to help you learn how to buy, sell and ultimately develop a strategy of your own, visit the Orders page.


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