Technical Analysis - Systematic Trading - Backtesting


Systematic trading is most often employed after testing an investment strategy on historic data. This is known as backtesting. Backtesting is most often performed for technical indicators, but can be applied to most investment strategies (e.g. fundamental analysis). While traditional backtesting was done by hand, this was usually only performed on human-selected stocks, and was thus prone to prior knowledge in stock selection. With the advent of computers, backtesting can be performed on entire exchanges over decades of historic data in very short amounts of time.

The use of computers does have its drawbacks, being limited to algorithms that a computer can perform. Several trading strategies rely on human interpretation, and are unsuitable for computer processing. Only technical indicators which are entirely algorithmic can be programmed for computerised automated backtesting.

Read more about this topic:  Technical Analysis, Systematic Trading

Other articles related to "backtesting":

Meta Stock - Backtesting
... Backtesting answers the question, “How much would I make or lose if I traded this security or these securities using these buy and sell rules?” Traders ...
Backtesting in Climate Modeling
... Backtesting plays a critical role in the evaluation of weather and climate models ... Within the field of climate modeling, backtesting plays a particularly important role due to the scale and duration of climactic events ...