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What is Backtesting?
Backtesting is the process of applying entry and exit signals to time periods of past historical price data to quantify through an equity curve whether the system would have lead to overall profits in the past. A backtest is a look back at how a quantified trading system would have performed in the past. While a profitable backtest does not guarantee that the same signals will make money in the future, if it did not work in the past it most likely will not work in the future either. A good backtest does raise the probabilities that since it worked on past data it may work on future price action because the signals ... (full story)
