Backtesting with OptimalTrader
OptimalTrader (OT) provides a great deal of ability to test your option strategy ideas. Using the knowledge gained by following this example, you can test one of your own hypothesis and develop it into a trading system. This can be used to greatly increase your confidence and eventually profits in your option trades.
First, let's start with the basics. This article assumes that you already have OptimalTrader installed. If not, click on the link to the left, labeled, "Free Trial".
Back testing in its most simple form involves
- Starting OptimalTrader
- Moving the system date on the bottom of the page to a previous date
- Finding or building a trade
- Advancing the system date forward one day at a time
- Watching the trade as it progresses
The goal of back testing is obvious. The goal is to test out a theory with historical data in order to build a set of rules of entrances and exits so that you can make a profit. It should generate for you a list of rules so that in the heat of trading, you will have preplanned your reactions to market activity.
In the next section we will illustrate the most simple backtest. We will build a trade and then walk day by day, viewing the trade along the way.
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