Backtesting is a very common term in the professional trading community. The process by which the most common faults are analyzed in a trading system is known as backtesting. The professional traders always backtest the EAs and trading bots before they deploy it in the real market. Though the developers of the bots vigorously backtest the EAs they don’t have the trading skills. They might be the world’s best programmer, and the logic in their code might be extremely precise, still, you need to know its functions properly.
Backtesting the trading bots is not like testing a manual trading strategy. You have to evaluate the technical parameters as well as the profit factors. But it doesn’t mean you need to become a professional programmer to backtest any trading bots. We will highlight a few amazing tips that can help you to backtest the bots.
Embedding of the codes
The source code or the trading bots must be written very accurately and efficiently. If the source code is not well written, the functions will be slow. Even though it can calculate thousands of metrics in a short period, the latency will be very high. High latency usually results in delayed output and the professional traders consider it as the lagging issue. The trading bots must have the ability to deal with real-time dynamics. Unless it can process real-time market data and present them to the traders without any delay, the bots can’t be used. You need a smart bot that has optimized embedded codes. Latency issues in a trading bot can’t be accepted.
Complexities of analyzing the data
The developers often make super complicated formulas to analyze the key metrics of the asset. But the professional traders always love to use a simple system. They know to prioritize things at trading. Instead of stacking the trading bots with complex formulas, program it in such a unique way so that it can prioritize things just like the human mind. It might sound complex but this can be done with few simple lines of coding. The best thing about the trading bots and market is that they don’t require any emotional attachments.
During the backtesting of the trading bot, if you find things hard and see heavy usage of computer resources, chances are high the trading bots are not well optimized. Before you ask for an optimization, note down the complex calculation the bots focus on during the trade analysis process.
Everyone thinks taking trades in the financial market has nothing to do with the selection of the asset. But it is a very wrong conception. Trading stock is completely different than trading Forex or ETFs. Every investment industry has some specific criteria which require special actions. So, using a generic trading bot can show the potential trading spot but you will be getting just 10% of the market picture. You have to know about which industry the bots are designed. If it is designed for the retail Forex trader, backtest it in the Forex market. Stop wasting your time by backtesting the model in the stock market.
Arguing on the technical parameters and trying to find universal trading bots is more like daydreaming. If this was so easy, instead of offering multiple assets, the broker would have offered us only one major instrument for trading. Since they are not doing it, you must understand every bot is designed to trade specific sets of assets.
After installing the dashboard, you test the master dashboard of the trading bots. It is nothing but exploring the user interface and knowing more about the input functionalities. Try to change some of the settings and see the performance of the bots. The rookies often fear changing things in bots but there is nothing to be afraid of. If you mess things up just hit the reset button.
The bots must give you access to all the functions built into the system. As a trader, you might have to adjust some key parameters and this should be accessible from the master dashboard. If this feature is not available, you should look for a bot that allows customizations.
Be selective with the trading bots. Try to use this article as a guideline to backtest your bot. You don’t need a super expensive bot to make a consistent profit. Careful selection of the bots and using your intellect to analyze the output of the trading bot can help you to find some great trades. Though it might take some time to get used to the bot, it is one heck of a step.