Expert Advisor Studio ~ Why backtesting so important?
# Expert Advisor Studio ~ Why backtesting is so important for trading?
Backtesting, portfolio backtester is the ONLY way to reproduce mistakes causing the closing-out of the positions or to find out the reason why the market moved unexpectedly. Fintechee provides expert advisor studio that includes a feature of portfolio backtester.
# It was very boring sitting in front of the desktop all along.
When I started trading Forex eleven years ago, we just could trade manually. Even if the background color of the trading terminal that I used was dark, my eyes became very tired after watching the screen for a long time. But I couldn't leave the seat, because we couldn't know when the market entries would come.
# Backtesting is the ONLY way to reproduce mistakes causing the closing-out of the positions
Sometimes I really felt very tired, so I left the trade position open and had a nap. After I woke up, I was surprised that the position had been closed.
What happened? Was there an economic event released? To know the cause, I checked the charting system with the past several hours' historical data. Eventually, I understood that the reason why the positions were closed was the market moved to cross the stop-loss points of my positions. No special economic event.
I wondered why so coincident...
If I hadn't had a nap, would the positions have remained open? Would I have modified the trades' take-profit and stop-loss points to avoid closing out automatically? I couldn't tell, because it has passed, we couldn't regret not doing the things after missing the things.
The ONLY thing we can do is to replay the historical data again and backtest our trading strategies to know whether this kind of mistake would take place repeatedly if we don't change the trading style.
# Can backtesting help us know the truth? Can we find out the reason why the market moved unexpectedly?
Then, if I found the backtesting didn't close out my position during the period of replaying the historical data, could I conclude that the market was driven to move to close out my position when I had a nap?
Some banker told me that was impossible for a big player to drive the market to move to close out the positions of individual traders deliberately. The cost was too high to manipulate the markets, especially the Forex markets, it was absolutely not worth doing.
Yes, that's true. The banks may not regard the tricks like a good solution to get the profit, but the brokers may not think in that way. I can suspect, but I can't assert. Because everything just happens ONCE. Replaying the historical data just can tell us how the markets moved but can't tell us why.
# Anyway, backtesting makes us close to the truth and provides us with a very good solution to overcome our own mistakes.
By comparing the results, we can doubt whether the markets moved unexpectedly or moved "deliberately" like tricks. At least, we would be warned before we trade real. We can find out our wrong trading style, potential mistakes or the factors to bring us more risks.
Nowadays, there are a lot of trading platforms to select. The common features of the trading platforms are the same. They all have charting systems, indicators, order systems. But few support algorithms for trading or so-called expert advisors.
Fintechee is a WEB-based trading platform template, it supports all the features that the most popular trading platforms offer. It supports EA, trading simulation and backtesting, built-in FIX connectivities as well. Please try for free.
- Fintechee WEB Trader
- Account ID: 875730
- Investor Password: 1