Backtesting is a crucial step in developing a trading strategy. It involves applying your trading rules to historical market data to assess how the strategy would have performed in the past. By doing this, traders can gauge the potential effectiveness of a strategy before risking real money in live markets. Backtesting helps refine strategies, manage risk, and build confidence in trading systems.
1. Testing Strategy Viability
Backtesting allows traders to see if a strategy would have been profitable over a specific historical period. If a strategy shows consistent success during backtesting, it is more likely to work in live markets. Converse...