Monday, 19 October 2015

An efficient way to make profits from the stock market

Back testing is a way to test the trading strategy on the historic data. Thus the strategy can be tested on the multiple time periods in the history and it can be seen if the strategy works or fail. The two important ways to practice and find the validity of the strategy are back testing and paper trading. In back testing the validity of the strategy can be found in any past period. There are many automated tools and software available to back test the strategy. The strategy from very simple to most complex can be tested using the back testing tools. The strategy may involve various indicators to execute the buy and sell signals. There are various inputs to the back testing software like the initial capital, stop loss levels and the various indicators and their triggers. The software computes the profits and the loss incurred in the trades and give the overall wealth accumulated taking care of the profit and the loss.
In paper trading the trading is done without real investments. Thus various strategies can be practiced without the real investment and one will have virtual profits and losses. Various strategies can be tested and validated and one can test and find the success rate of any strategy. Strategy from very simple to very complex can be traded and validated with the help of paper trading.

The trader can trade with the help of a self devised technique and strategy and can use back testing technique and paper trading to confirm and validate the strategy. If the trader does not have the sufficient knowledge about the stock market he can take the help of advisory firm to trade based on their support. These advisory firms have expert technical analysts who provide accurate stock tips. They provide accurate buy and sell calls with proper stop loss.

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