Practice Makes Perfect
The value of back testing...
We have many tools at our fingertips today that allow us to to go back in time to optimize and improve our strategies, find any technical or theoretical flaws, as well as gain confidence in our strategies before applying them to trading live markets. I spend more time back testing strategies than actual trading. In today’s post, I am going to review my current method of back testing plays as well as the tools that I use.
While there are many software packages out there, both free and fee paid, I personally like TradingView. It is one of the more powerful charting packages out there that allows users to “replay” a chart in history. I spent a few hours on Sunday this weekend testing a strategy that I have been developing for FOREX trading on the 15 minute chart of USDJPY. Check out the following brief video.
Toms Option Tools
When backtesting equities for application in the options market, it is critical to be able to test option strategies. The best of the best options analysis tool out there is Tom Option Tools. Check out how I use it in the following video.
Once I have determined the entry and exit points of a back tested strategy, I need to track its series of trades to understand an individual strategy of system. The critical numbers are “win/loss ratio” and “profit factor”. Why are these so critical?? I use them to give me a psychological edge over the market by sticking to the exact methodology and obeying any rules in the expectation that the same statistical results will repeat. My go to is TraderSync, which has both a free version and fee based versions with more robust analysis tools. Here is a video demonstrating how I use it.
The final results of Spring 2022 Earnings Season are in. The plan for last week was published here last week as a bonus to all subscribers, both of which were Iron Condors on CRM and CRWD. One was a loser, one was a winner.
Actionable Plan (non-ER related for the coming week is per below…