TradeStation and BackTesting

I saw an advertisement today for TradeStation. Overall it sounds like a very good platform for trading, but one of the key points of the ad made me laugh. TradeStation offers you the ability to develop a rule based strategy and back test it. At the risk of nasty emails, I'm going to say that I know enough about statistics to know that backtesting doesn't matter. I think there was a Motley Fool strategy a few years ago where you took the bottom performing five stocks of the Dow, dropped the bottom one, and invested in the other four. It was backtested to get superior returns, but eventually, the limits of backtesting were discovered. If you ask me, backtesting is just a way to build false confidence, which makes me wonder why TradeStation would focus on that benefit in their advertising.

  • I understand your feelings on backtestng – but in my opinion there is some upside to having a historical basis for a trade idea. Whereas the Motley Fool idea was fairly narrow in terms of its historical data set, a backtest that challenges the system by testing in non optimal conditions can provide valuable insight. I have a blog that highlights one such system, and your welcome to stop in a follow along.

    Thanks for the great site.

  • Neokanobi


    Enjoyed seeing your video on backtesting.I’m pretty new in trading and I was told to start doing backtesting and simulation on the platform that I purchase it TS before going live.

    I wonder if you have any pointers or guides that you can indicate me that a newbie like me can use to have ideas of the parameters usually used when doing backstating and that I can apply to my TS. (I know they have the backtesting feature the only thing missing is giving examples of the most common indicators used doing backtesting a stock for buying or short to get someone started.)

    Thanks for any assistance on this matter.