by PresentTrading
Backtesting of trading indicators is necessary because the results displayed by the indicator may not necessarily correspond to the actual situation.
Although Tradingview is one of the most widely used trading platforms currently and has a rich library of technical indicators, some of the indicators have the problem of "peeping into the future". 👀 The purpose of backtesting is also to avoid future function problems.
Looking into the future, two common problems are:
1️⃣Future data is introduced when calculating the indicator, for example, the opening price is used;
2️⃣As well as the wrong parameter setting in backtesting and testing, the buying distance has been moved by one K line.
Therefore, through backtesting, we ensure that our trading strategies and indicators are reliable.
The following is a case that illustrates the necessity of backtesting of trading indicators. The picture shows a strategy I wrote today based on the most popular machine learning on TV recently: Lorentzian Classification.
As shown in the figure, there is a huge difference between the backtest results below and the backtest results given by the indicator in the upper right corner. Although the indicator shows a green mark/red mark indicating buy/sell, it can actually only be the next root. The reason can be judged to be problem 2️⃣ ☑️
Key Points --> Backtesting of trading indicators is necessary to verify reliability and avoid future function problems. by PresentTrading
Ref: "Machine Learning: Lorentzian Classification — Indicator by jdehorty." TradingView, 13 Mar. 2023
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