After you`ve set your initial stop loss, chosen your method for calculating your trailing stop loss, and implemented all your money management rules, there is one last thing you should do; you should begin back testing your system.
With out back testing you will be headed in the right direction, but you won`t know what to expect from your system. Back testing will also give you the confidence to keep going when you begin to experience the doubt that every trader faces at some time.
In Part 1 of Designing a Trading System in MetaStock, I had discussed the major components you needed to be able to track to create a mechanical entry system. These were measures of price, liquidity, trend, and volatility. The question now is, how do we code this into MetaStock?
First, let me offer you the most valuable piece of knowledge I have acquired over the years about MetaStock formula writing. This one secret will turn you into a MetaStock master. Do you think I know all of MetaStock`s hundreds of pre-programmed formula and propriety indicators? Well, I`m good, but I`m not that good.
By David Jenyns
In this three article series, I`m going to guide you through the process I use to design a [tag]trading system[/tag] using MetaStock. I’ll cover the four major components that every successful trading system has in common, and then I’ll show you how to code these components into the MetaStock program. Please note that this is by no means investment advice and any information I cover is purely for illustrative purposes.
Here’s a great article on back testing from our good friend [tag]David Jenyns[/tag], author of the [tag]MetaStock Programming Study Guide[/tag], available for purchase at: www.metastock.ca/training/metastock-programming.aspx
Original Article: www.makeupblog.cn/real-estate/the-secret-art-of-backtesting.html
If you have not back tested your trading system, you might as well trade with your eyes close.
In fact, whatever technical analysis criterion you use to trade with, be it [tag]moving averages[/tag], [tag]candle sticks[/tag], [tag]volatility breakouts[/tag], [tag]fibonacci retracements[/tag] or any other [tag]trading system[/tag] you have devised you’re going to need to back test your trading system thoroughly and objectively in order to remove any possible doubt about it’s capability.
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