Is your Backtesting Software inflating your system's potential?

This is the 7th section in our series on building forex trading systems. [B]What you will learn: - Pros and cons of backtesting software - Variables to account for in your backtesting - Recommendations for being as successful as possible as a system tester [/B] Backtesting software is a complicated subject so we have split this lesson into two sections. In this first section, we will look at the pros and cons of software and specifically the kind of work software does well and what it doesn’t do well. This is an important discussion because, like many products in the forex, software and system results are often marketed without your best interests in mind. There is often intentionally missing or misleading information included with software or purchased systems. As usual, information and education is your most effective weapon against this sort of marketing. In the second section of this lesson we will look at a demonstration of a backtesting software package to illustrate the benefits of software. We will also demonstrate the use of a spreadsheet to capture many of the benefits of software without the expense. [B]Backtesting Software Pros [/B] [B]- Impartial [/B]A computer is impartial and is not fooled by bias. A computer will test exactly what you ask it to. If a particular formation or trading signal appeared in the past, it will find it and identify it for you. The results from a computer will almost always be more complete than testing by hand from a chart. [B]- Efficient [/B]Backtesting software can do in seconds what would take someone hours to do by hand. This is a great advantage when developing system signals. Software can find your trading signals and then plot them on the chart for you to examine in greater detail. [B]- “What if” analysis [/B]Developing appropriate stop losses and profit targets is an important component of testing any system. Software can retest the same system with new “what ifs” to adjust for different stops, limits, costs, etc. with just a few key strokes. For the rest of this article and a video, click here: [url]http://www.pfxglobal.com/video-archives/building-trading-systems-backtesting-software.html[/url]