Appendix B: Back-testing
In this appendix, we will examine the research required to effectively back-test a trading system. Conducting in-depth research using technical analysis techniques can be quite a complex task. You should set some objectives and consider the following:
1 Establish your term for trading: intra-day; short term — one day to three weeks; medium term — two to 40 weeks; long term — nine or more months.
2 Direction of trade: long or short, or both.
3 Market to trade: equities, equity derivatives, index futures or derivatives, foreign exchange, commodity futures or bonds. Essentially you need to decide whether you wish to trade leveraged or non-leveraged markets. When you are starting, it is best to trade non-leveraged areas ...