How to Backtest Your Trading Strategies?

For Non Programmers

When a trader’s trading tactics result in more losses than gains, it’s a nightmare. This normally leads to the trader either giving up trading or changing their trading strategies often. We’ll learn how to backtest your trading strategy for non-programmers in this article. 

So firstly, let’s understand What is Backtesting? 

The definition is straightforward. We’ve developed a trading strategy and want to see how well it performs in real-world scenarios. Backtesting trading strategies, to put it another way, is the process of extrapolating a given strategy or hypothesis in a previous time frame. To put it another way, we don’t apply the strategy to the coming period and instead rely on historical timeframes and data. Backtesting trading strategies involve going back in time to see how the current hypothesis will do. 

The key advantage is that a trader can choose any timeline with similar features and factors to the current one and adapt the current trading strategy to the historical timeline with the same result. Sounds quite effective, but it’s also very complicated. You won’t be able to backtest trading strategies until you learn how to do it yourself.

Without a doubt, having a good plan on your side is a huge advantage. Backtesting a technique, on the other hand, does not guarantee perfect performance or large profits. It’s all about market exploration and in-depth research, just as you do every time you visit the stock market today. Furthermore, you must consider certain critical advantages and disadvantages.

How to Construct a Strategy Model?

To accurately simulate trading strategies on historical price data, you must first understand how trading strategies are built, irrespective of which asset you choose for backtesting.

There are seven main components to a systemic strategy:

  • Entry  
  • Target  
  • Stop
  • Long entry conditions
  • Short entry conditions
  • Long exit conditions
  • Short exit conditions

The first three are possibly already familiar to you. The level at which you enter a position after determining you want in is referred to as entry. The target level is your take-profit level, and the stop level is your stop-loss level. If the price falls below any of these thresholds, the trade is closed.

The last four are maybe less well-known. These are the trigger points for you. A specific set of circumstances in which you reach and leave roles. Most traders use “setups” to take trades, which means they have ambiguous entry requirements.

However, if you are backtesting, you are creating frameworks, and a framework is not complete until it has a given pipeline from start to finish with outcomes mapped to all possible scenarios.

So, take your plan concept and transform it into a structure by writing out simple, concise responses to each of these seven core components. After that, you’re able to dive into some in-depth research.

How does Bytemine assist you with backtesting?

The Bytemine signal builder programme, based on the performance of our candlestick-trading indicator, offers a simple method for traders with no coding experience to generate and backtest their trading signal indicators.

Transform your trading ideas and tactics into completely automated trading signals. In these few steps mentioned below,

  1. Build: Using our simple flow-based programming method, you can build your trading signal.
  2. Backtest: We provide 10 years of historical data for you to run your trading strategy. 
  3. Integrate: Use our pre-built integrations to comprehensively screening your new trading signal.
  4. Trade: Use the latest signal to execute live trades and start forecasting market movements ahead of the competition.

Disclaimer: There are potential risks relating to trading and investing and you should not trade with money that you cannot afford to lose however, for those that educate themselves and adopt appropriate risk management strategies, the potential update can be significant. Please note that all opinions, research, analysis, and other information are provided as general market commentary and not as specific investment advice.
Bytemine: Build, backtest, and deploy trading algorithms for all major global financial instruments and asset classes from your browser without coding. Our easy-to-understand graphical user interface helps traders of all levels to become more successful and enter each trade like a professional trader. Create an account today and access our global market data, trading signals and start creating your own trading algorithms on a free, limited plan. Upgrade anytime with no commitment.