What is a Backtest and How Can We Find Optimal Parameters?

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Hey everyone,

This will serve as part four in the series “Becoming a Better System Trader”. If you missed the first three posts here they are

  1. http://trademyalgos.com/2015/09/the-difference-between-a-ferrari-and-a-mercedes-benz/
  2. http://trademyalgos.com/2015/10/why-not-to-use-stop-losses-becoming-a-better-system-trader-part-2/
  3. http://trademyalgos.com/2015/10/why-sequential-trade-system-statistics-like-drawdown-are-meaningless-becoming-a-better-system-trader-part-3/

This installment is much simpler. I just wanted to share a quick video explaining the most basic tool in a quant trader or system developer’s toolbox: the Backtest.

I also went over a rudimentary example finding an optimal parameter value as well as some tips regarding how to select an objective function to determine “optimal”.

Backtest: TradeMyAlgos

Stay tuned for the follow up video about the next testing phase: the Walk-Forward test

Enjoy the upcoming weekend,

David – click my name for a quick About Me post.



P.S. Don’t forget to take one of our free trials while they are still available. You can sign up here: http://trademyalgos.com/active-alerts/FreeTrialSignUp or here: http://trademyalgos.com/ProElite/FreeTrialSignUp


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