Hi everyone,

My question i have for anyone who can answer it is what does someone mean by "backtesting" a particular strategy or system and how do you do it.

Pictorial explainations will be preferred but however if you have links to sites or videos it will be greatly appreciated.

Thanks

Peter

Peter,

Backtesting refers to the idea of defining a strategy purely in terms of numbers, then writing a computer program to "trade" using historical data.

I wrote a series of articles that covers the concepts behind the backtesting and strategy development process (click here for the link: Shaun Overton - InformedTrades, but here is the gist of the articles:

I defined a very simple strategy:

Buy when the RSI closes at or above 73
Sell Short when the RSI closes at or below 27

Exit from buy when the RSI closes at or below 65
Exit from sell when the RSI closes at or above 35

Then I wrote these rules in a computer program. The most popular for forex is MetaTrader. Other popular software options are TradeStation or MetaStock, which is totally unrelated to MetaTrader.

The computer program produced returns as though I had taken every signal during a two year period. Using this information, the trader can then extrapolate whether the strategy has any potential or merit.

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Shaun Overton
OneStepRemoved.com
Strategy and Automated Trading Development

Thx for ur insights shaun, appreciate it.

Helped me heaps,

Peter

hi guys, i'm new to forex and enjoying this site, very educational, anyway can someone help me with my question, my bro live in australia and he opened an account for me under his name and he gave me the login and password but i live in lebanon, is this gonna make a problem? i didn't try it yet, it needs 3-5 days for money transaction, i will trade micro and it's meta trader, i've been practicing on demo, can i simply switch to live and put the login and pass? does it work this way?

thx in advanced.

leroyroy,

The demo account information is useless in terms of a regular account. I did not fully understand the exact situation, but I have worked with many Lebanese clients in the past. Every brokerage I know of accepts accounts from your country.

Although it is inconvenient, I recommend opening an account in your own name and funding through a bank wire. This gives you total ownership of the funds and avoids potentially awkward legal situations. If you need assistance with this process, please send me a private message.

__________________
Shaun Overton
OneStepRemoved.com
Strategy and Automated Trading Development

Thanks Shaun for the reply, i hope in near future i will open my own account,
can i still trade with my brother account, if he gives me his login and password even we live different country, afterall it's forex

Hi leroyroy,

Glad to hear from you and welcome to the community.

I am not sure how this would sit from a regulatory standpoint, however from a technological standpoint there should be nothing that I can think of that would prevent you from trading in the manner you have outlined.

Best Regards,
Dave

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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.