"If You Haven't Back Tested Your System, Using TradeSim, You Might As Well Be Trading With Your Eyes Closed!"

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Date:
From: David 'The MetaStock Exper' Jenyns

Dear Friend, If you're wanting to be a successful trader let me impress upon you the importance of back testing your system. I believe it to be one of the most critical steps in designing any trading system and here's why. Dr. Van Tharp in "Trade Your Way To Financial Freedom" describes the 3 components of successful trading to be: the system, money management & your psychology. The only way I know to improve all 3 components is through backtesting.

David Jenyns Live

Here's how backtesting directly impacts each component:

1. The System: Backtesting allows you to find out if and how profitable your system truly is, even before you risk a cent. You can also test different variables to identify the most profitable combinations.

2. Money Managment: Backtesting allows you to discover which money management model works best for your system, further demonstrating the importance of having these rules in place.

3. Psychology: Backtesting is guaranteed to increase the confidence you have in your own system. Not only will you prove you're trading a winning system (making it easier to follow) but you'll have the metrics to back it up.

Backtesting really is what gives professional traders their edge! Sadly, even though it's most important, it's one of the least understood areas of trading.

Worse still, as I illustrated in my article "Upgrading Metastock", MetaStock just isn't up to the task of back testing your trading systems. Watch the video below to see what I mean.



With all that said and done, there is a solution and it is by far the best backtesting system I have ever seen. TradeSim is the first realistic true portfolio trading simulator and back tester available for Metastock.

I highly recommend you read all about it below!

All the best,



David Jenyns | Professional Trader, Author & Coach!
Co-author of the MetaStock Programming Study Guide

Back Testing Your System Is Critical!

By David Samborsky | Director of Compuvision - makers of TradeSim.

Whatever technical analysis criterion you use to trade with, be it moving averages, candle sticks, volatility breakouts, fibonacci retracements or any other trading system you have devised you're going to need to back test your trading system thoroughly and objectively in order to remove any possible doubt about it's capability.

To remove any self-doubt you need to thoroughly back test or simulate your trading system in such a way that it matches the conditions under which it will be traded. Once you have established that you have a reliable and robust trading system, only then will you be confident in trading your system.

The Importance of Back Testing

When trading what is the question in most traders’ mind? To answer this question I shall quote the introduction from Chapter 8 “Back Testing” of Mark Jurik’s book "Computerized Trading".

"Will my trading strategy be profitable? After having gone through the arduous process of crafting a trading strategy, this is the question you must ask yourself."

The ability to answer that question is the great promise that back testing holds out for all traders. A successful back testing procedure will greatly reduce the probability that you will begin trading with either an unprofitable strategy or one that does not meet your expectations. By adopting a sound and rigorous back testing approach, you will: -

Pinpoint which approaches to the market that are likely to be successful and which ones are not.
Generate good estimates of future performance for each trading strategy you test.
Create a record of your trading strategy's historical trading performance.
Produce data necessary for other components of your trading approach such as your asset allocation strategy.

Important Trading System Criteria

Profitability is not the only criteria by which a trading system should be evaluated. Drawdown and stress should equally be considered as well... for example, before you open a trading account:

- Are you satisfied that your system is reliably profitable?
- Will drawdowns wipe out your account?
- Is your system trading in a way you can tolerate?
- Can you tolerate long periods of no trading or too much trading?
- Can you tolerate a large string of losses?

The only way to answer these questions is to subject your trading system to extensive back testing.

Discover The Flaw In MetaStock’s Enhanced System Tester

Unfortunately MetaStock’s system tester leaves a lot to be desired when it comes to realistically and objectively testing the performance of a trading system.

Even though the Enhanced System Tester tests multiple securities in one batch, Metastock treats each security independently of the other. In other words, when Metastock tests the first security, it uses your predefined float and takes the trade over the test period selected. Once completed, it repeats the same process for the second security, using the same initial float, with no reference to the first securities traded.

The consequence of this type of testing is that you receive the same result as you would if you simply tested each security individually and added the results together. Not only is this process dreadfully slow, but the question of the performance of the trading system still goes unanswered. The trader then has to trade the system with a lack of confidence and a certain amount of self-doubt.

Lack of Confidence

Lack of confidence usually forces traders to question their own trading systems with a temptation to continually modify it with devastating consequences. This temptation is usually spawned by a string of losing trades or an opportunity to replace their trading system with a whiz bang indicator that was talked about on a traders chat forum which seems like the answer to all traders prayers.

Anything that sounds too good to be true will attract the attention of a trader who is not satisfied with their own trading system simply because they have not properly tested their system in the first place and have not built up the necessary confidence needed to successfully trade it.

In the end these negative subconscious thoughts will only hinder and destroy your ability to trade successfully. To improve your confidence in your trading system you need to thoroughly and objectively back test it - simple as that! Only then will you be confident enough to commit time and money to it!

The Trader's Dilemma

How can we test how a trading system will perform over a period of time when trading an arbitrary group of securities?

Introducing TradeSim...

TradeSim is the first realistic true trading simulator/analyzer for Metastock that can quickly back-test and evaluate a trading system across a portfolio of securities. With its powerful data processing capabilities TradeSim can evaluate the historic performance of a given trading system within a matter of minutes and do it with a realistic representation of a real-life trading scenario. Whether a single security or a multiple security portfolio, TradeSim answers the simple question: -

"What would have happened if this system had been traded in the past using an arbitrary portfolio of securities?"

Sounds simple - but it is extremely complex if not impossible to do with Metastock as it stands. However, with TradeSim it is just a simple matter of running a Metastock exploration on a portfolio of securities using your own set of indicators. When the exploration has finished you just simply run TradeSim and analyse the resulting trade data.

Here's what a couple of traders like you had to say about TradeSim:

You are probably not aware that to approach the functionality and power that TradeSim adds to Metastock you would need to spend many thousands of dollars more than the combination of both packages put together. Even then, competing packages fall quite short when it comes to analysis power and options as well as simplicity of operation. TradeSim was built right from the ground up with the professional trader in mind!

TradeSim is the first realistic true portfolio trading simulator and back tester available for Metastock. For the first time you can back test your trading system the way you would trade it and objectively analyze its performance without any of the limitations of MetaStock!

If you're interested in purchasing TradeSim now Click Here