All investment plans, methods, systems and parameters of those systems need to be constantly evaluated and adjusted.
Ideally, evaluating of a system would include all of the following steps:
1. Back-testing (using in sample and out of sample historical data)
2. Paper trading (forward testing)
3. Live trading
Today I am reporting some results of back-testing I've done. Here is what my favorite source of definitions - Wikipedia - says: "Backtesting (or back-testing) is the process of evaluating a strategy, theory, or model by applying it to historical data. Backtesting can be used in ... studying how a trading method would have performed in past stock markets".
There are many articles on the Internet on back testing. Here is one recent that talks on common mistakes in back-testing How to Backtest Your Trading Strategy Correctly
There are many articles on the Internet on back testing. Here is one recent that talks on common mistakes in back-testing How to Backtest Your Trading Strategy Correctly
Up until now I have been visually back testing the system using historical charts some of which I published. I have been mostly using 7 week period and 2 as a multiplier for our ATR-based entry and exits. These parameters work well for most securities and on most time frames from monthly all the way to intra-day.
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