You need to back test your system and your strategy to see if you would be profitable in the stock market. I think it is critical for you to test your system and your strategy before you enter any real trades. Especially if you are brand new…
You need to make sure that you understand the panel, you understand how the stock is trading and moving, what it all means when you are looking at the quote window.
Once you have those things in place just put on a few system testing trades. The reason for this is to see if you would be profitable or not. If you are not profitable with a fake system one that you can get in and out of any time with no pressure and no emotions than it makes it much more difficult to be profitable with real money.
It does not mean that when real money is on the table you are going to be much better, it just means that things are a little more emotional and a little more difficult. So having a system that you have tested and proven over time will give you more confidence to ensure that it is working.
Testing a system
There are many different ways to test a system, one of my favorite ways it to just take a regular notebook, write down how many shares you have, write down how many shares you would purchase on a certain date, what your commission rate would be, what the quote of the stock is and the stock you are purchasing, and just watch it. You should watch it for multiple weeks, months, or years.
#tradingstrategy #tradingsmart #backtesttrading #testingstocks #stockstrategy
Posted at: https://tradersfly.com/blog/back-test-your-stock-trading-strategy-system/
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Hi Sasha (apologies for the length of the question)
I am currently paper trading a trend following strategy based on the Turtles system. I am entering long on 52-week highs and exiting when moving averages cross, and vice-versa for my short positions. I want to back-test my system, but would rather do it manually than on a computer program as I feel this would be more beneficial to my learning, and I'd have more input over the trades that I take.
I am planning to go back as far as I can in a stock chart and literally just scroll through the history of the price, taking the signals and trades, and making a record on whether or not it was a win/loss. I will also start with a realistic amount of capital and record it's fluctuations throughout, and ultimately whether or not I am in profit or in loss by the end.
My main concern is whether or not this is this an effective/useful exercise and means of backtesting, as when I actually begin trading I won't just be trading one stock from start to finish? I was planning to carry out numerous back-tests in this way, each stock at a time, and see if my results were generally good/bad, but I am wondering whether or not this is an accurate representation as I will be trading multiple stocks at each time when I begin trading in real-life, therefore meaning the number of false signals/losses I could take and drawdown will be higher. Is this just one of the limitations of historical backtesting, or is there a more effective way of doing this?
Any help would be hugely appreciated 🙂 thanks a lot
Sami
hello. you think prudent to learn the language c programming? robust systems may be risk / gain> 2 ?;grateful
Best video i ever viewed!!!
do you have another shirt to wear?
what about when it comes to back test an specific trade? the books that I have read recommend you to back test your trade before entering with real money and I believe they mean to back test with the tools that come with the brokerage account software. Do you back test your trades this way or just the way you describe on the video? which is pretty much keeping track of your trades on a journal or log. Do you know what I mean?
Also any suggestions for Free or Low priced Charting software?
Oh, I guess pips are just something Forex uses or came up with? I see a lot of negative comments about it Haha