Backtesting and Trading Psychology
Test a strategy honestly, avoid curve-fitting, and build the habits that let you follow your rules under pressure.
Lesson 1: Honest backtesting
Write rules first, then test. Include realistic spreads, commissions and slippage. Test at least 100 trades across different market conditions, and keep a separate out-of-sample period you don't look at until the end.
Lesson 2: Curve-fitting
If you tweak settings until the past looks perfect, you've fitted noise. Robust strategies work across a range of nearby settings and several markets, not just one magic number.
Lesson 3: Forward testing
Trade the rules on a demo or very small account for a month or two. Live execution, spreads and emotions often differ from the backtest.
Lesson 4: Psychology and routine
- Pre-market checklist: news, levels, plan for the day.
- Hard daily loss limit to stop tilt.
- Rate each trade on whether you followed the plan, not just on profit.
- After three losses in a row, step away for the session.
Keep going
Practice what you learned with the free calculators, then pick your next course.