Forex Backtesting software
Forex backtest is a strategy applied to the trading to the data of past. To put in simple words a Forex backtest can be explained by saying that by applying the strategy to the data of past, it studies the parameters that are crucial for your trade. That is, when you know about the factors responsible for the market to perform in a way in past, you can actually decide the conditions that can strengthen these parameters. These parameters can be time period in terms of days and weeks, estimated profit in terms of percentage or pips, profit goal and so on.
You can hone your trading skill with Forex backtest software which allows you to practice trading with historical data. Few companies may charge a one time fee for these data and some ask for monthly subscription. You can also collect the data for free. That would require a little research. After this, comes the testing part. You should use your intuition to make a strategy. This gives you an edge to prepare yourself when using real money in real market. However, to get a hang of it, you can use someone else's strategy to start with. You can pick it up from Forex trading forums or from the mentor, that is, if you have any.
Consider Some Key Points
Before you pick up the strategy of Forex backtest, you need to understand it thoroughly. Its importance, how profitable it can be and many more things are to be considered before you venture with it. So, your first task is to understand the system and then start trading with it. Incomplete knowledge of the system can generate profit only by fluke. For consistent return, know its functions, importance and weaknesses as well.
Study the price chart minutely. When practicing, keep trying varied stop losses. Theoretically applying, you can pick up the best picture to prove that the system is profitable but when applying with real money, you can not always succeed in closing with the best possible price.
Keep testing the data with Forex backtest system. Test to the data of several past months because performance of the system changes with the market conditions. If it has been profitable consistently for few months, it does not mean that it will continue to do so. As the market scenario changes, the Forex backtest system may cause loss too. So, you need to understand the market trends and the difference between actual result and the estimated result as per the system.
Market acts differently immediately after any economic news release. The spread at this point of time is widened. So, if your Forex backtest system gives you profit of a very little margin, trading with it in such circumstances can yield a very little or no profit. As a matter of fact, it can go negative as well.
Sure profit is not guaranteed by any Forex backtest software. So, you need to know its limitations and profitability before you start investing huge stakes with it. Once you consider all the points mentioned above, you will find it easier to trade with or without Forex backtest system of trading.