Money management and position sizing - Page 2 - Trading-Lab

Leth · #11 11-05-2007, 08:40 PM

odds are that if your system was profitable in the past, it will be profitable now and into the non-existant future.

backtesting software will tell you how much your system would have made if you implimented it over a set period of time in the past. keep in mind however, that im talking about systems that are non-curve fitting (over-optimization will give you poor results) and robust. in my experience, trendfollowing trading is the easiest to backtest. this is not advice on how to trade, just my perspective.

check out this link:

http://www.investopedia.com/articles.../05/030205.asp

this will explain backtesting in a bit more detail than i can.

hope this helps...

good luck my friend

Alchemist · #12 11-08-2007, 08:20 PM

the term backtesting as it refers to trading involves:

1)collect a financial instrument's past price data going back anywhere from a few months to several decades

2) apply to it your previously created trading criteria (i.e. buy when price crosses its 50 unit moving average)

3)collect the results

4)analyze the results (performance) to see whether it is feasible to run your trading system in today's markets

backtesting is good, but it should be taken with a grain of salt as even though the adage says that history always repeats itself, there is no assurance that will actually happen. And even if history DOES, in fact, repeat itsel, we don't know WHEN that is going to happen.

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#11 11-05-2007, 08:40 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	odds are that if your system was profitable in the past, it will be profitable now and into the non-existant future. backtesting software will tell you how much your system would have made if you implimented it over a set period of time in the past. keep in mind however, that im talking about systems that are non-curve fitting (over-optimization will give you poor results) and robust. in my experience, trendfollowing trading is the easiest to backtest. this is not advice on how to trade, just my perspective. check out this link: http://www.investopedia.com/articles.../05/030205.asp this will explain backtesting in a bit more detail than i can. hope this helps... good luck my friend __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 11-05-2007 at 08:51 PM.

#12 11-08-2007, 08:20 PM
Alchemist founder of Trading-Lab Join Date: May 2007 Location: New York, NY Posts: 296	the term backtesting as it refers to trading involves: 1)collect a financial instrument's past price data going back anywhere from a few months to several decades 2) apply to it your previously created trading criteria (i.e. buy when price crosses its 50 unit moving average) 3)collect the results 4)analyze the results (performance) to see whether it is feasible to run your trading system in today's markets backtesting is good, but it should be taken with a grain of salt as even though the adage says that history always repeats itself, there is no assurance that will actually happen. And even if history DOES, in fact, repeat itsel, we don't know WHEN that is going to happen. __________________ Happy Trading!