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How to build an effective algo trading strategy

Back-testing is an effective way for traders to try new strategies, by using historical data to understand how it would have performed in real conditions

December 20, 2022 / 06:24 PM IST
How to build an effective algo trading strategy

Representative image

Back-testing uses historical data to simulate a trading strategy. How does it help? If you want to try a new trading idea, wouldn't you like to know how it performed during the COVID Crash in 2020? Or during the corporate tax cut announced by India’s finance minister (see candle circled on the chart below)? History doesn't repeat itself, but it certainly rhymes! Before putting actual money behind a trading strategy, it is useful to understand the strategy's historical risk and...

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