Forward-Testing Definition
Forward-testing, means trading a strategy live with very small size to see how well the strategy (and the trader!) perform in real life.
Forward-testing is typically done after backtesting to make sure the trading strategy is not the over-optimized result of curve-fitting or data mining. It also gives a chance to try out the mechanics of entering, tracking and exiting trades.
Extra Insight:
I’ve heard varying advice on the size of trades for forward-testing ranging from smallest possible size - think 1 share – up to just enough to engage the trader’s emotions.
For more insight into this topic, Design, Testing, and Optimization of Trading Systems
(Backtesting Blog is an Amazon Associate
Updated: 11/12/08.
October 27th, 2008 Filed under GlossaryTags: backtesting, curve-fitting, data, exit, forward-testing, sizing, strategy, trading
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