Backtesting...

This statement, "BACKTESTING", has always been somewhat of a confusing topic for me. What exactly is meant be "backtesting"?

Does one take their "system" they have, go back to previous days on the chart, and look to see how it "works" an any given day? Or, are there sepcific information one can enter in the "backtesting" part of MT4 to see how your "system" would worked, or works?

Backtesting is a concept I do believe I can get somewhat of a fix on. But, then comes the statement, forwardtesting. Now that one really confuses me big time!!

Anyway, just wanted to ask to see if anyone had any comments on these topics to kind of help clear things up. Thanks in advance...

Hello mctdavs!

You can backtest by hand (using printed charts or your monitor) but beware. Moving indicators such as RSI, MACD, etc. need to be assessed on closed bars! In other words, if your system rule says "RSI crosses 50" you better darned sure make certain it's a closed bar. The RSI may cross 50 20 times during the candle, and then close at 49.

As for MT4, closed bar is critical too.... my system never use iRSI(...., 0) because that looks at the current bar, and leads to problems described in the paragraph above.

If your MT4 code is written with iRSI, High[], Low[], etc, make sure the offset is at least 1.

Just my two cents.

basically backtesting is taking a given system and testing it with previous data, anywhere from yesterday to 35 years back.
Forward testing is taking a given system and using a real account to test it and see how it works currently.
...I believe that is right, if it isnt someone please correct it.

testing 1... 2...