Published On: Mon, Feb 4th, 2013

Back Testing

Back Testing refers to the testing out of a financial theory with historical data.

Many times the financial theory is a quantitatively based trading program.  In this case, the trading concept would be programmed into a trading platform.  The trading concept would include the monitoring of economic indicators as well as data that would be of a strict technical analysis in nature.  The indicators are often analyzed mathematically and statistically resulting in a blended system that issues buy or sell signals to the trader.  This trading system is then Back Tested against many years of past historical market data in an effort to prove the accuracy of the buy/sell signals that the program is designed to issue.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.