How accurate is backtest and how to improve it?

[trader84]

If backtest shows 70% win rate(including risk reward) than how often is this strategy profitable?

I heard there can be big difference on backtest and live test so how can backtest be optimized and improved to show the more accurate results?

thx

[TradeIdeas_DA]

I'll add more but start with this post: http://marketmovers.blogspot.com/2007/01/2-x-2-decision-box-for-determining.html

[TradeIdeas1]

This is one of the most common questions in semi automated and grey box trading.  The answer is seldom what people want to hear, however I will give you the real deal.  Back test results give you an edge much like seeing which way the wind is blowing before hitting a golf shot.  It helps you to understand what to expect and be better prepared than your competition.  Simply stated you are better off than an individual who does not have that information.  However every single day in the market is different than the day before.  There are zero guarantees on any market day that the results will be the same.  What you need to do is have a plan that takes into account both good and bad scenarios that may result after initiating the trade.  You have to know how much you are going to be willing to loose on any trade and have to have a plan if something in the market makes the strategy that backtested well start performing poorly.  In most cases good backtest strategies work for a period of time and then the conditions change like the weather and you have to find a different edge.  What is nice is that with our software you are able to test almost any scenario and be prepared.  Keep things simple.  If you are trying to trade a strategy with a 70% success rate you are starting off at a good point, better than most.  Keep it simple and disciplined and you should do great.  Don't worry too much about optimization because that is the past.

[trader84]

Thx alot for your answer. So do you suggest than automated trading over semi-automated?
Into which platforms can automated trading be implemented. Im using currently tradestation.

[tengkorakfx]

One thing that certain on the market price that we cannot perfectly predict the future of the prices. We may get more than 70% win rate with backtesting along with things that already happened (e.g Brexit, crisis in Greece, etc.), but we will never know what kind of big impact that will happen to the market after. In my MT4 platform with FreshForex broker, I prefer full automated trading so that I can see the results of front-testing of the A.I.

[RickHal]

Is 70% considered a great win rate? How accurate is it for others?