How long should I backtest a online daytrading system
Below is a MRR and PLR article in category Finance -> subcategory Investing.
How Long Should You Backtest an Online Day Trading System?
Introduction
Day trading expert Markus provides insights into the ideal duration for backtesting a day trading system. Learn more about making effective trading choices.Key Considerations
Determining how long to backtest an online day trading system depends on a few key factors. Here’s what you need to consider:Trade Frequency
The number of trades your system generates per day significantly impacts the backtesting period. The goal is to gather enough trades to make statistically valid conclusions:- High Frequency Systems: If your day trading system generates about three trades per day, totaling approximately 600 trades annually, a one-year backtest should suffice to gather reliable data.
- Low Frequency Systems: If your system only generates three trades per month (36 annually), it's advisable to backtest over multiple years to ensure the data's reliability.
Underlying Contract
Consider the specifics of the contract you're trading. For instance:- E-mini S&P: Since it didn't exist before 1999, backtesting before this year is pointless. Furthermore, the market environment before 2002 was significantly different, with less liquidity and different participants. Therefore, Markus suggests that a robust backtesting period for the e-mini S&P is 2002-2004.
Conclusion
Backtesting your day trading system involves understanding trade frequency and the characteristics of the markets you're engaging with. By following these guidelines, you can better assess and refine your trading strategies for more reliable outcomes.You can find the original non-AI version of this article here: How long should I backtest a online daytrading system .
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