There are various ways to review trading systems, the most common being back testing and demo-ing. Many people hold the belief that “if it ain’t broke, don’t fix it.” Likewise, if the system does not work, a revision of the system is needed.

Benefits Of Doing Demo-ing and Back-testing Evaluations

1. History is known to repeat. When you do a back-test, you can spot any patterns that seem to be repeating.

2, Max draw-down ratios can be provided to investors, letting them know exactly what these systems can provide them.

3. Trust is built that can sustain the investor while waiting for results. This trust allows the investors to take chances they may not have otherwise taken when trading.

4. Using back-testing investors can replicate the performance statistics of a system, allowing them to accurately estimate the probability and magnitude of any possible trade profits.

Disadvantages of Backtests and Demos

1. Spreads

Spreads can narrow at the slightest sign of surprising news. You might also find differences in the spreads between night and day. The bid and ask…