A welldone backtest is the first step to a forwardtest. I don´t know a system that doesn´t work in backtest but works in forwardtest. The forwardtest should be done with real money to test all the real conditions. Not all your money, just a bit of it. Any backtests have limitations, but it will give us some light about the limitations of the system before the Real Trading. Have a nice trade.
for me, frankly speaking, after backtesting, it always makes my ea perform badly when doing forwardtesting, so i make a drastic steps, completely abandoned backtesting 😈 , instead, do optimization while forwardtesting 😎 ..
surprisingly, my ea starting to make me money... 😲
In my case, the first time I can taste a consistent profit because I did the backtest. Yes, you will never 100% believe that the backtest result will be same as forward test, or actual trading.
I don't know how to program so I used spreadsheet to backtest my system. As far as I concern, the things make the result in reality differ from the backtest result because of,
- Human error (inconsistant following trading plan) - Market uncertainty (well, that's the case...)
Through practice I think we can overcome human error. As for market uncertainty, well, we do need to calibrate a little bit of our system in certain period. Our trading system need to be robust and flexible. I do monthly analysis to identify weakness in my system. If I detect one, then some setting need to change. So far its ok.
I strongly feel trade without backtest is like driving car with eyes close. At least it give us more confidence in our trade. Of course, after backtest, we need to do the forward test for optimization. After this then the system will complete. I dont think any system will forever work unless we do the calibration in certain period or something like that.
As for me, back tests are to be done every time. At least theycould help you to understand the way the EA works and to figureout the settings you are going to use. Even if the results are not very truthful, you will know how the EA operates and what you need to chnage.
Well said Sharle. The reality is most people don't like backtesting, because they aren't able to reproduce the results in live. Yet, that wouldn't be an issue of backtesting. That would be an issue of the actual trader not following the rules he/she is following while backtesting. You typically see this with people who use indicators which re-paints.
The other thing that i'm thinking about is the algorithm that the EA based on. Like if it is short-time trading robots they won't actually give you the correct result since they are out the real working conditions and they have more time to react on the price changing. But if robot is based on some kind of a system that works according to the long-term price changing logic, the EA back tests result are to be closer to the live trading.
I run 3 charts for everything I trade. One live dollar trading, next demo and last theoretical (data only) For me, they need to mirror one another +/- a trade or two. DD, equity etc. all need to line up. Also, if you refresh the theoretical chart and the signals move and or results change, go back to the drawing board. Mine match and signals do not move. That does not mean the market conditions will be the same and therefore future profits or drawdowns can and will be different without additional trade management and even then it will be off to some degree.
The faster one trades, the more critical everything is. I trade very fast, but I have been doing this for more than 25 years and learned a lot about what not to do. I joined this site yesterday. Link to my results here, if you want to get a peak at the plus and minus of higher trading frequencies.
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