TradeStation Backtest Analysis tutorial cover

Learn the TradeStation Backtest Analysis

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Table of Contents

Today we see how to perform the TradeStation Backtest analysis for any financial instrument.

Any financial instrument has a fundamental character; it can respond well to breakout strategies or mean-reverting strategies.

So, a straightforward first approach can be to try a strategy that buys at the breaking of the day’s high and sells at the breaking of the minimum of the day before.

To perform these tests, the strategy must be simple. You won’t even have to use money management, stoploss, or take profit. Also, you won’t even have to use other filters.

How to use the TradeStation backtest to analyze AUDUSD character.

Let’s start with AUDUSD to show you how to proceed.

The simple code for breakout strategy:

backtest for breakout strategy character in tradestation and multicharts

As you can see, the strategy buys when today’s Close exceeds yesterday’s High and sells when today’s Close exceeds yesterday’s Low.

In this first step, it is only necessary to verify that the equity line is ascending.
The other backtest parameters for the moment are not to be considered.

audusd breakout strategy results tradestation easylanguage

So, AudUsd responds well to breakout logic. This test shows us that after breaking the highs and lows, the movement generally continues.

If we try a mean-reverting strategy, it should not work and have descending equity.

The code for a Mean-reverting strategy could be:

backtest for mean reverting strategy character in tradestation and multicharts

As you can see, the strategy buys when today’s Close exceeds yesterday’s Low and sells when today’s Close exceeds yesterday’s High.

audusd mean reverting strategy results tradestation easylanguage

Unfortunately, after 2013, the volatility in the currency market has been decreasing. This led to a worsening of the breakout logic. These simple backtest give us confirmation.

The S&P index

For example, if we do the same test on U.S. index that has a reversal character like the S&P, the result is visible.

S&P breakout strategy results tradestation easylanguage S&P mean reverting strategy results tradestation easylanguage

This is only the first step to verify the fundamental character of an instrument.

Now we know that the S&P index reacts well to reversal logic and does not react well to breakout strategies.

Let’s start with this to develop a strategy.

Never trade an instrument contrary to its character.

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