Building Automated Trading Strategies October 2018 | Page 52

When Backtesting
➢ Use backtesting as a component of a general trading experiment which
also includes optimization and customization
➢ Perform various backtesting experiments in order to test your strategy
in all market conditions (bullish, bearish, and ranging)
➢ Backtest your automated strategy over a long time frame
➢ Over-optimization means after many calculations and re-calculations,
the backtesting results are optimized for past market conditions
➢ To avoid over-optimization, use randomness in your backtesting
experiments
➢ Successful backtesting can never guarantee future results, therefore,
don’t risk too much on any automated trading strategy, no matter how
promising it seems
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