 |
How long should I backtest a online daytrading system? |
 | 1 |
|
|
|
Submitted by Janeane Carnagie
| RSS Feed
| Add Comment
| Bookmark Me!
I am frequently asked how long one should backtest a online daytrading system. Though there's no easy answer, I will provide you with some guidelines. There are a few factors that you need to consider when determining the period for backtesting your online daytrading system:
Trade frequency
How many trades per day does your daytrading system generate? It's not important how long you backtest a daytrading system; it's important that you receive enough trades to make statistically valid assumptions*: If your online daytrading system generates three trades per day, i.e. 600 trades per year, then a year of testing gives you enough data to make reliable assumptions*. But if your trading system generates only three trades per month, i.e. 36 trades per year, then you should backtest a couple of years to receive reliable data.
Underlying contract
You must consider the characteristics of the underlying contract. The chart below shows the average daily volume of the e-mini S&P:
It doesn't make sense to backtest a trading system for the e-mini S&P before 1999, because the contract simply didn't exist! In my opinion it doesn't make sense to backtest an e-mini trading system before 2002 because at that time the market was completely different; less liquidity and different market participants. I believe that a reliable testing period for the e-mini S&P are the years 2002 - 2004.
|
|
|
|
|
LinkedIn Recommendation:
 Courtney Stone - Market Developer at Optanium - I launched a new business part time and was looking for some ideas on how to make it easy to manage from home. I found Teo at eWorkshopCourses.com and began learning about web marketing and realized there really is so much to learn, but it was all right there! I like his GET UNSTUCK message for the site. I was stuck, and Teo got me unstuck fairly quickly! - March 15, 2012, Courtney was Teo's client |
|
Featured [Investing] Articles:
|
|
