Backtesting in trading
Backtesting is a manual or systematic method of determining whether a trading strategy or concept has been profitable in the past. A trader can manually backtest a strategy or use backtesting software to help determine if a trading strategy is likely a waste of time and money, or if it shows promise and profitability in a variety of markets.
Since backtesting does not always require software and can be carried out by any type of trader, manual backtesting will be the focus of this article. This means that there is less risk without automated software as it can be tested using a free demo trading account, such as the one offered on our online trading platform. As always, there are no guarantees and as such, you should still consider risk management tools.