Hi, I’m fairly new to the Forex and have been trading, only demo, for quite a few months now.
I appear to have developed a trading system and would like to backtest it correctly. I wondered if there was any software that could do this for me as I’ve been going back manually using MT4, but this is quite a bit labourious.
The system, based on candlesticks and technical analysis, works in all time frames, it has produced some very interesting results including a 7163.6 pip run in the weekly timeframe and a 6307.2 pip run in the monthly timeframe of the same chart over the same time.
Are these results good, average or normal, I ask as if they are just the norm then backtesting seems a waste of time.
Depends on how you decide to interpret back testing. I’ll manually backtest something to see if it’s viable. However, back testing is bias. Your mind seems to only find the winning setups. It’s easy to say you would have taken a trade when you already know the outcome is profitable in your favor.
Forward testing is the only reliable method in my opinion.
Proper backtesting involves more than simply looking back on your charts and looking for your setups. As mastergunner99 points out, such a method is ripe for your own biases to creep in. You can easily “ignore” setups that result in loosing trades since you know ahead of time how the “trade” will turn out.
To get around this problem, you could set up your screen so that you only see the “current” price and hide the “future” prices. However, this can get tedious.
To perform proper backtesting, you need to either code your system yourself (I believe MT4 has options for this), or purchase software which can get pricey.
