The History of the financial markets is very long. Over the past period, many genius in markets have developed many useful indicators to try and analyse what is transpiring in the market; and to predict what may happen next in market.
Nowadays trading is very much easy because internet has opened up a new era of advanced technology, so by sitting at home anyone can enter into trade. Moreover trading platforms have become quite robust, to maximize efficiency.
This has opened up the world of indicators in a revolutionary way, to a whole new breed of investor. Most indicators use parameters. These are variable inputs that govern the signals outputted by the indicator. We can back test to find optimal parameters for a given indicator.
But can back testing tell us correct upcoming future?
But back testing can help us estimate what is likely to happen, based on markets past behavior. But that have some lacunae.
Firstly, back testing provides a perfect look at the past, but only an imperfect estimate of the future. When we select an indicator, we choose it based on its past performance. This suggests it may be …