hi
I would like to know the difference between trading live and when you’re backtesting.
Thanks in advance
The main difference is that you are more calm, clinical and will stick to your rules.
When doing live you tend to put more of what you expect to see on it.
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Backtesting is basically a tool for strategy calculation based on the historical data offered by almost all the licensed brokers like fxview, etoro, and ic markets. When live trading, you can be assured that the market will respond to your actions no matter how small the size of your trade is. The orders that you put in change the market depth and these changes can be witnessed in real-time too. This however is not possible in backtesting since there’s no algorithm that can recreate the market depth change.
When you are trading live you are putting real money in risk. As the forex market is very volatile it might be possible that you lose your money if you don’t have a proper trading strategy. But when you are back testing you are not putting real money into risk and you test on the historical data available to make a good trading strategy.
Backtesting allows you to see that a setup worked or didn’t and draw stats from that. Live testing requires you to actively use your strategy in real time which comes with pressure and real money going on the table
I’ve heard and learnt about backtesting in my course but haven’t heard about the latter. Rather it’s this thread that’s introduced me to forward testing. Please suggest what makes it the part and parcel of the strategy evaluating?
Two words answer- live trading. This strategy basically helps in solving some deployment issues that you would have otherwise not guessed with back testing alone.
@Jimmy Another important aspect is that you’ll get a better idea about the trade’s impact, market volatility, and liquidity on trading performance.
I’d also suggest you to use forward testing in concurrence with the backtesting, which should be the first move in testing the trading idea’s credibility. Turnkeyforex and pepperstone allow me to use this strategy. You can ask your broker if he allows this and if not; try demo account trading with my brokers.
It’s true that live trading gets you profits. But if you go live without backtesting your strategies on a demo account, you may not be able to determine whether a strategy is worth using in the live market or not. You need to check the strengths and weaknesses of a trading strategy before risking your money with it.
You can run a test on both demo and live account. The difference is whether you have real money or not. You decide.