Backtesting is so vital to a trader's success.
Let's think about it. Remember when we were in grade school and we were given homework Monday-Thursday? Then after studying we had a test on Friday to test our knowledge to see how well we knew the material? Well, that's what backtesting is.
The only difference is that backtesting is your homework and the market is the one who grades you. You only know if you pass or fail by how consistently profitable you are.
As a trader you are not just backtesting strategies. You are backtesting your rules. You are backtesting your questions, theories, notes, teacher's recommendation, your failures, and success of your trading plan.
Now, most traders don't start off with a trading plan. Most trader's do not have a trading plan until around year 1 of trading.
A trading plan is your personal trading guide that is dedicated to you and you only. When you open your trading plan it should have your name, your portfolio(list of pairs you trade, your schedule, your rules for exits, entries, setups, and etc). It should not be dictated on anyone else and how they trade.
For example, if you are the support and resistance trader, you may have easier rules as far as trade level to level. If you the trend trader, your rules may be to trade with the trend or against the trend.
Here is a video that will detail how to backtest support and resistance levels.
Want to get really good at backtesting so you can create a trading plan?
Backtest your time available and. what time frame will give you the best results This means you will have to back test multiple time frames and it will be a tedious process. So, take your time. Journal and log everything.
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