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How to backtest strategy on TradingView?
Many traders use TradingView for backtest the strategies and to find if there exist any chance of profiting from the financial markets implementing the strategy. Backtesting on the TradingView is the process of manually or systematically (automatically) finding out whether a trading strategy or striding setup created on this online trading platform has been profitable in the past trading days or not.
Steps to backtest the Strategy on TradingView:
Step 1: As you require the data for the backtesting, you can choose the long-term period timeframe like months and years for testing the long-term strategies. If you run the test for the short-term you can choose the small timeframes let’s say trading data for a week.
Step 2: Here you have to define the parameters, like setting the conditions for entering or exiting from the trade positions. Determine if the price of the stock will move you will take that action and repeat the same strategy. Also include the risk management in the parameters and allocate the same in each trade.
Step 3: Now use the TradingView rewind tool to turn back and remove the forecasting of chart patterns. You can also go back in time and check the trades from weeks, months or years in previous trades depending on how far you can check the trades.
Step 4: You need to analyse price charts to create the entry and exit points. You can do this till all the trading sessions on the chart up to the present time have been positioned and marked or you write them down on paper. However, it can take some time or a few sessions of backtesting and recording the results.
Step 5: When your testing process is completed you can calculate the total profits or loss you have earned or incurred using this trading strategy or setup in the backtesting trading sessions.
This backtesting will help you know how much your trading strategy is successful and works as per your expectations. However, sometimes backtesting does not work properly, mainly when data from live trading sessions is used. If you have not used enough historical data or tested with a small sample size then your result can be affected.