Backtesting can be done by a real person going over data for past time periods or it can be done algorithmically, which reduces the risk of human error.
Be careful when considering backtesting results
Past performance is not indicative of future results and you should, therefore, be careful when considering backtesting results.
Backtesting is not an exact science and there are many variables that can affect your performance.
Some of the things to be aware of include:
- The What are value stocks? A value company is a company that app... More conditions. environment can change, so even if you apply your strategy using exactly the same rules, the outcome can vary depending on
- Different will have different which can produce variations in your results.
- When trading in a live environment, there is a greater chance that you will make an error or react too slowly to changing market conditions.
- Trading large amounts means that there is a possibility of moving the of an simply by placing a trade.
Always practice with a demo account first
Experienced traders will be better placed to recognise certain market conditions and decide when or when not to trade a strategy.
It takes time to acquire this skill and you should always practice with a Money is a generally accepted medium of exchange to buy and... More.before trying out any strategy with real
To find out more about backtesting, go to the following lesson:
To see backtesting results for ourbeginner strategy, read our lesson: