Good morning everyone,

I hope the day finds you well. Today we will be concluding the series on Trade-Ideas and backtesting. The last piece to cover....backtesting. Hopefully you have ready the 2 previous blogs about understanding  your trading strategy and style, then the creation of your trading strategy within Trade-Ideas. Once you have done these two things, you will now want to test your strategy to see how you would have performed.

To begin the backtester, you can click on either the button at the top of Trade-Ideas or on the bottom left. This will open the configure backtester window. There are five criteria that you have to identify.

First, how do you want to define success. Price moves up or down. Does your strategy look for stocks to buy or short? If you are wanting to go long a position, then you would define success as price moves up. Going short....price moves down. After direction, how much does the price of the stock need to move to validate your action. "By at least" can be defined in exact dollar amounts or percentage. Basically, after recognition of the alert when would you take action on the stock.

Second, you need to identify entry time. This is asking when you will be trading your strategy. Part of your style may be that you only trade during particular market hours. You can identify this here. Simply give the start time and end time of when you want your strategy to look for results.

Third, is profit target or stop loss. Do you want to set limit prices on the positive side of the trade and/or stops on the negative side of a trade. Just check the box and note the dollar amount in either direction that you would normally set your targets.

Fourth, is other exit conditions. Here you can choose trailing stops to protect a trade. You have the option of either % or bars (dollars).

Lastly, you need to tell the backtester when you want to exit the trade that has met all other criteria. Once success has been identified as you have defined, and it is within the trading time window you set, and has not yet met any other exit conditions, when you want to close out of a position. You can choose from very short time range all the way into the next open.

Once you click on "OK", Trade-Ideas will begin calculating your results. It looks through the last 15 days worth of trading to match both your strategy and style to provide results on performance of your strategy. If you are comfortable with the results, then you can have coinfidence the next time you get a real-time alert to take action.

In conclusion, this is your strategy. You have to be comfortable about how and what you want to trade. Trade-Ideas is a great tool to help you identify opportunities in the market place that meet your criteria.

Talk soon,

Todd