Backtesting Vs Live Testing

I have read one of Boris’s article regarding How to stop Dumb money and trade real money in Fx. It is really good though that it points out the relationship of eliminating low probabilities. Of course in Backtesting you won’t notice that though there are a few you might spot. Forward testing either on a demo or Live trading account is a different story. But I was interested on what he was saying that testing new ideas on a separate account. Testing on a real live account has a more precise benefit compare to backtesting. It also test the psychology behind trading.

Using Live real account testing also has the benefit to eliminate those low probabilities  and also you get tot est them on an uncharted area where you don’t expect how the market will do on those new ideas strategies. You get to know how the broker will also react on those new ideas.

But again, you need to test them at least 1 year to know the performance of that system. While on Backtesting you accelerate to know a system at a fast pace and it is base on a historical data. Still it is beneficial to understand the rules of a system inside out, a form of practice to search a consistent pattern. It accumulate a statistic on how you perform by applying objective rules.

From my opinion, I think having both ways to test a new system may be great, but may again increase the period of gaining the experience and expertise on trading it self. Still back testing may be my foundation and forward testing is eliminating the unforeseen outcome.

If you want to read up Boris article here is the link  http://www.fxstreet.com/education/trading-strategies/forex-trading-strategy/

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