Chapter twelve. ON SOLID GROUND

Trading with poor methods is like learning to juggle while standing in a rowboat during a storm. Sure, it can be done, but it is much easier to juggle when one is standing on solid ground.

Now that you are aware of some of the major ways in which you can get inaccurate results from backtests, you may be wondering: "How can I determine what I might actually be able to achieve?" or "How do I avoid the problems described in Chapter 11?" or "How do I test the right way?" This chapter will discuss the general principles of doing proper backtesting. A thorough understanding of the underlying causes of the backtesting predictive errors discussed in Chapter 11 is an important prerequisite for this chapter, and so it is a good idea to reread that chapter carefully if you only skimmed it the first time.