Overview
Backtesting is the process of simulating a trade strategy on historical data to test how that strategy would have performed over the period in question.Backtesting Steps
The following represents a summary of the basic steps required to run a backtest.- Preparing the Dataset : discusses various methods of preparing a raw dataset for backtesting.
- Calculating Indicators : shows methods of adding indicators to the price dataset.
- Calculating Trades : shows how to code an algorithm to calculate trades from a price dataset.
- Backtest Adjustments : discusses the adjustments to the theoretical backtest which makes it more realistic.
- Analyzing a Backtest : Once the backtest has been completed, there are several methods to analyze the backtest.