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Why Backtesting is Important? is the most frequently asked question. It is one of the most important key success factors for most of the investors and traders. It helps to decide which trading setup or system is more reliable compared to others. In this video, I will share 7 points highlighting the importance of backtesting trading strategy multiple times.
1. If you analyze a particular chart two times, your conclusion will always be different. It is due to varied focus and different mindset each time. Therefore, it is important to backtest a strategy multiple times preferably on different days.
2. You should compare the backtesting trades with each other. You can create own rules. The same trading setup can make you conclude differently each time.
3. Backtesting increase your accuracy. it will help an investor or trader to understand the behavior of a trading setup or system. This is the reason why some investors or traders invest or trade only on one stock.
4. You can learn about the most successful patterns. For example, If a double top or double bottom is formed after divergence then it is a very reliable and successful pattern.
5. Practice makes you perfect.
6. You can cut down losses if you backtest a trading system or setup.
7. You can also use programs like MT4 or Amibroker to backtest.
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