Backtesting Forex Trading System

Generally, the phase of backtesting comes after development or selection of a trading system. Likewise, after selecting or developing a particular Forex trading system a trader can go back, i.e, using the historical data, and start testing it, that’s why it is named as “backtesting”. It is necessary, for through backtesting the Forex traders can test the efficiency of their system.
Backtesting of a Forex Trading System is usually done after developing or selecting a particular Forex trading system. A trader may select any kind of Forex trading system based on personal interests or can develop his or her own trading system. Therefore, it is necessary to test the efficiency and profitability of the system before using it.

Thus, Backtesting refers to the practice of examining the efficiency of a trading system which will perform under disparate market conditions. A positive result makes the trader confident about the fact that the system will not under perform when needed. Without backtesting the trader will not be able to gain the confidence.

However, backtesting a Forex trading system basically involves in examining the performance of that system against some historical market data. Therefore, the hidden bugs, which may cause some flaws in future, in the system get uncovered which ables the traders to adjust themselves accordingly or make necessary corrections.
As a result, risk factors can be reduced to a large extent.

Generally the time needed for backtesting depends upon the complexity of that system. While backtesting a Forex trading system, several things need to be kept in mind. These are, volatility, annual returns, average gain or loss, total amount of profit or loss during the specified testing period, risk-adjusted returns, historical data range, amount of capital that is exposed to risk etc.

More Information On Forex Trading
Forex Stock Trading Forex Stock Trading System
Future Forex Stock Trading Automated Forex Trading
Types of Forex Currency High Frequency Forex Trading
Forex Trading Back Testing Forex Back Testing Rules
Forex Currency Trading Forex Currency Trading Strategy
Forex Currency Trading System Forex Trading Account
Forex Trading Signals Forex Trading Tips
Risk Management in Forex Steps of Forex Trading

Last Updated on : 23rd July 2013

This website is up for sale at $20,000.00. Please contact 9811053538 for further details.