Paper trading and backtesting – an essential part of a systemic trader’s risk management
Imagine that we have used all the power of Python and developed a trading application. Now what? Is it time to immediately launch it and try earning some money? No! Before jumping in the pool, it’s essential to make sure there’s water in it, and in our case before putting the app into production, it’s essential that it can make money, at least in theory.
In this section, we’ll consider paper trading and backtesting – two cornerstones of systematic trading that help us understand potential pitfalls with the newly developed strategy. We will learn about historical data, trade simulation, and ordering, and we’ll also quickly consider some ready-made packages that simplify this part of the development.
What are paper trading and backtesting?
After we have developed a trading algorithm, connected to the data source, and are ready to send...
