Thread on Backtesting🧵
🔸Pros vs Cons
🔸How To Backtest
🧡&🔁
🔸Pros vs Cons
🔸How To Backtest
🧡&🔁
My trading performance started significantly improving once I started backtesting. The goal of backtesting is to practice executing your model over and over again, not a bunch of different models. This quote is a great analogy for backtesting.
Pros to Backtesting:
- Learn if your trading model is working or not
- Improves edge as you collect more data
- Trains your eye to see setups form in real time
- Gives you confidence when executing trades
- You don't abandon model when you go through DD periods
- Learn if your trading model is working or not
- Improves edge as you collect more data
- Trains your eye to see setups form in real time
- Gives you confidence when executing trades
- You don't abandon model when you go through DD periods
Cons to Backtesting:
- Isn't live markets
- Psychology and emotion is not involved
- Previous market conditions don't represent current conditions
- Data can be skewed if you've seen the price action live before (backtesting price action that you haven't seen live is recommended)
- Isn't live markets
- Psychology and emotion is not involved
- Previous market conditions don't represent current conditions
- Data can be skewed if you've seen the price action live before (backtesting price action that you haven't seen live is recommended)
I first started backtesting with @tradingview replay but the data for how far you could go back was very limited so then I switched over to @Forex_Tester. After a few months of that I made the switch over to @fx_replay after finding out they have a Tradingview integration.
Before you begin backtesting you have to follow one single trading model and have defined rules for your model. When I first backtested my model I backtest ES/US500 and collected data for 4 years (2019-2022).
I spent Dec 2022 & Jan 2023 backtesting and then after these results I was confident in my model so I started a MFFX 200k Challenge the following month and passed both phases after 2 months. Since then I passed a 100k Phase 1, took a trading break, and am now working on phase 2.
If you want to learn my trading model here is everything you need to know.
Whatever size challenge account size you pick, pick the same starting balance for backtesting. Pick 1 pair and then backtest that pair for each year. Create a new backtest project for each year because you want to see how your model performs year over year.
Once it's created I adjust the timezone to NY local time, adjust chart settings to my preference, and then add any timeframes that I use that isn't listed in the default.
To place orders use the RR and place it on the chart to where you want your entry SL, TP to be. Then CLICK on the RR tool then at the top next to 'indicators' click 'PLACE ORDER' then you will see this pop up. At the bottom you can keep track of account balance & PnL.
When you backtest it's important to journal all of your trades and study them in order to learn and improve edge. Here is my trade journaling template & a thread on journaling.
Once you've successfully backtested your model, use that same model to forward test/paper trade. Once you're consistently profitable with that then it's time to take a challenge account once you feel comfortable.
Every trader will be different. Some traders they may only need a few hundreds of trades collected, others may be thousands before they find confidence in their model. But there more trades collected, the better.
Sign up for my Lifetime+ Membership to get live access to my real time trade signals & follow closely along my journey to 1M in funded capital. whop.com
Here is my Notion link to access more free educational content from me. ossified-ground-684.notion.site
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