Trader Dale Volume Profile
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Backtesting & getting started<br />
Backtesting & getting started<br />
Since I have already talked about the strategies, money management, position management and<br />
psychology, I think it is now time I showed you how to backtest the strategy that you like and how<br />
to get started.<br />
Here is my way of backtesting new trading ideas and implementing them in my trading. At first, I<br />
would like to say that there are many ways how to approach this. Some people do their<br />
backtesting very thoroughly and they are very analytical in their approach. It takes them very long<br />
before they implement new ideas in their trading but when they do they have very accurate<br />
statistics and a heap of backtested trades. Some people are the exact opposite. They just look at<br />
few examples and start trading their new method straight away. Again – there is no one right way<br />
how to do this and every way has its pros and cons.<br />
I am naturally more inclined to be quite thorough in my backtesting. Unfortunately, there are<br />
some disadvantages when you are too thorough. The most significant disadvantage is that<br />
backtesting and implementing new ideas takes a lot of time. The more thorough you are the more<br />
time it takes and the more time it takes the less trading ideas you can backtest. Because of this, I<br />
found a method that is quite thorough, but also fast and practical. It consists of 5 phases<br />
Phase 1: Rough backtest<br />
When you have a new trading idea you should know as soon as possible<br />
if it is worth something or not. You don't want to spend days of<br />
backtesting just to find out that this particular idea leads nowhere. For<br />
that reason you want to make the first rough backtest as simple and<br />
Make the first<br />
rough backtest as<br />
simple and quick<br />
as possible.<br />
quick as possible - for example, use RRR = 1, ignore the macro news,<br />
don't look for any confirmation, don't require any more confluences and<br />
neglect all sorts of things that would otherwise influence your trading.<br />
You want to know roughly in 1-2 hours if this idea is worthy of any<br />
further research or if it leads nowhere and it would be a waste of time<br />
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