On the other hand, traders who only apply computing power and leave human logic out of the picture are likely to suffer huge losses. Those who apply diligence and common sense to backtesting trading strategies in Forex are usually in a better position to be rewarded with tremendous gains. Since then, the process has continued to advance, but not always for the better. However, technological advancements have simplified the entire process for us. The electronic process that allows us to check results online and gain confidence in our strategy today used to take months, even years, in the past. In the 1990s, a person was considered an ‘investing innovator’ if they were able to display data on a computer monitor. Most of the trade ideas came from a profound understanding of fundamental analysis, or the awareness of market patterns.
Then, they would manually write exhaustive notes of their trade results in a log. Traders would make their conscientious trades on charts, making the position either to ‘buy’ or ‘sell’. In 1980, backtesting of a Forex system was a pretty straightforward concept. Backtesting strategies work on the assumption that trades that have performed successfully in the past will perform well in the future.
The software recreates the behaviour of trades and their reaction to a Forex trading strategy, and the resulting data can then be used to measure and optimise the effectiveness of a given strategy before applying it to real market conditions. Forex backtesting software is a type of program that allows traders to test potential trading strategies using historical data.