Importance of Making Forex Backtesting

If you're planning to venture into the Forex market, be aware that this requires investing time and is a process. As with many careers, the person must go through a process of preparation and practice to succeed and Forex is no exception. This article will discuss the Backtesting, which is a part of the process that should make operators.
The Backtesting in Forex:
It is a procedure used by beginners and advanced operators, which involves making a series of exercises to validate strategies learned to operate the market. Is based on estimates and comparison of results. In other words, more specifically, is to make historical evidence given strategy.

This is used to confirm the operation and effectiveness of a strategy. It is recommended that Backtesting for a long time to build confidence in the way they operate. During this process, generate statistics on all available data to draw conclusions at the end.

The importance of Backtesting:

A person who is thinking to venture into the Forex market should make Backtesting, as it will prevent further losses. The Backtesting must do all traders from beginners to advanced. For beginners, it is necessary to form a habit from the beginning and in the case of the advanced, this will help you get better results if you do not have the habit of testing.

It is considered very important to perform this procedure as it will strengthen:
- His confidence to operate.
- His confidence to use a certain strategy.
- His memory for subsequent operations.

It will also help:
- To accelerate the learning process to operate.
- To develop ability to implement its strategy.
- To confirm the effectiveness of a strategy.

It is generally recommended to have completed at least about 300 tests Backtesting with different variables before starting real trading within the market and thus be better prepared to start trading strategy in a real account. This way you will not lose their capital in a few trades.

Procedure for the Backtesting:

Backtesting Before starting, you must psych to tolerate errors made, no matter how many times it fails, remember that the goal of making a Backtesting is testing. It is better to fail on tests that fail in a real account.

To make the Backtesting there is no specific format or model, as this depends on what the operator wants to validate, but here is explain some fundamental aspects to perform this procedure.

To start you can take a sample of 200 or 300 situations occurring in the market. This test is called a "random" because market contexts are chosen randomly. You must first set the parameters and be objective in decision-making at the time of this procedure, the less subjective because it will get better results.

After that he must conduct their operations as if operating in a real and tabulate your results, using a template in Excel. You need to make the Backtesting in real circumstances, for best results, for example if the operator used to operate in periods of 1 hour and with certain pairs, must do so under the same context in the tests.

This Excel template you can be adjusted by way of analyzing. This template should specify in the boxes as follows:

Pair used in the test.
Opening and closing price.
Strategy (This must specify what period of time and which indicator or indicators used)
Proceeds. These recommended order from highest to lowest.
Losses obtained.
Specify the most cattle and the most lost.

These data can vary, but these are the key elements that should bring the template in Excel. At the time of analysis is recommended to estimate a rate of return on the strategy and a percentage of the maximum consecutive losses. You should also estimate the means and standard deviations for analysis. After that you can make graphs that will show more clearly its results.

Finally after making the Backtesting, you should establish its own rules, based on the results and will have its own conclusions, as their next step will be to implement its strategy tested or proven in a real account. Performing this procedure will help you choose the right strategy to operate and win consistently and continuously in the Forex market.