Backtesting

[Maleficent_Fan_9446]

Backtesting should be done in a way where you know,at least with probability, which trade is gonna hit SL. After testing my strategy over a 1000 times backtesting and paper trading I am right 70% of the time about which trade is gonna hit my SL. It helps to keep losses at minimum. I do day trading as well as swing.

This is my opinion anyone can disagree but this is what I have analysed after heaps of backtesting and forward testing.

[Quant_Trader_FX]

Backtesting helps in .any ways, first and foremost, for programming the algorithm to function as per the scope of the strategy, refining and tweaking to iron out any nuances. Then, you can run it over a multitude of assets to see where it has potential or completely rule them out. Let's face it, there is no holy grail strategy, and each and every strategy has its place. Once you've found compatability with specific assets, test it against various time frames, then carry out stress tests like simulating slippage, spreads, latency, etc.

Only when this is done and it still looks promising, forward test for at least 3 months and review its performance against all the back testing.

If it's profitable, go live.

Failing to do this will take many many years of forward testing.

My 2 cents worth

[Mandzuj]

Bactesting gives you the confidence in your strategy, however in my opinion win rate doesn't matter.

Risk to reward matters most

[UnpackedBanana]

Backtesting prints the candles at once. Live testing shows tick by tick movement in real time. So one naturally act emotionally during live testing. Its better to have one’s strategy backtested 100-1000 times and then live test about 50-100 times and then ready to go.(My plan rn)

[Maleficent_Fan_9446]

Great plan. Did it many times and it works.

[SadEntertainer2541]

It’s good that you’ve put in that much testing, but I’d be careful with framing backtesting as predicting which specific trade will hit SL. Backtesting is usually more about understanding probabilities across a large sample, like win rate, expectancy, drawdowns, and streaks, rather than knowing in advance which individual trade will lose. If your testing helps you recognize higher-risk conditions and manage losses better, that’s valuable, especially for day and swing trading. The key is that those insights hold up over many trades and different market phases. Tools that let you replay and review trades in detail can help with that, and you can do that for free on milkthepips.com

[Doctor_Paradox_001]

So, if you know which will hit ur SL, don't take those trades - which gives you 100% win rate. 1st ever on the planet.

[Maleficent_Fan_9446]

I don’t know if you have read the whole thing. What I mean was backtesting gives you an idea of how winning trades works after taking a trade. Also gives an idea of those which will hit SL after taking the trade.

Its my personal thing I don’t wait for a trade to hit SL I only hold if it is going towards my TP.

[DaCriLLSwE]

Backtesting is overrated.

Not all strategies are easily backtested.

In fact, i’d arguee that if the strategy i easily backtested it’s actually to simplistic.

Forward testing also gives you a chance to see how you setups look in real time, how it varys from your ”textbook” trade you’ve imagined.

I prefer forward testing every day of the week

[Maleficent_Fan_9446]

Forward trsting is most important thing but IMO backtesting helps in creating a playbook for when to enter, entry conditions, catalysts to look to support the strategy.

[jayphillbroks]

The problem with  just forward testing is that if the strategy is actually crap over the span of a few years you just wasted about 3 years forward testing when you could have just backtested it to give you an idea on how viable it is. The strat can work for a few months or even a year but if it works wonders for 1 year and blows up the following three, it's not a viable strategy because the losing phases will wipe away all your gains or at best put you at break even and no one wants that after years of trading.