Strategy Backtesting and Validation
In the previous chapter, we saw how the process of transforming a trading idea into a trading algorithm works. In this chapter, we are going to delve into strategy evaluation by learning about using EasyLanguage code to run backtesting and using TradeStation and Excel features as a unique tool for strategy evaluation purposes.
The main purpose of this chapter is for you to understand both the financial and statistical aspects of algorithmic trading.
In this chapter, we will cover the following topics:
- Understanding backtesting and overfitting
- Sensitivity analysis
- Backtesting across different symbols
- Backtesting versus buy-and-hold
- In-sample and out-of-sample
