GLOSSARY

BACK-TESTING

6 May 2016 By PDSNET

A strategy is tested or optimized on historical data and then the strategy is applied to new data to see if the results are consistent. For example, you may believe that a 200-day moving average provides signals which enable you to perform well in the share market. This "trading strategy" can be back tested by applying it historically to the ALSI 40 shares over the past ten years and comparing it to a "buy and hold" strategy for the same shares over the same time period.

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