Learn how backtesting can improve crypto trading and what you need to get started.
Many traders think that cryptocurrencies are different from traditional assets like stocks because their value cannot be determined by things like balance sheets and industry trends.
This is why crypto traders often favor analyzing technical patterns like price and volume changes in order to identify opportunities.
Backtesting can give these traders an idea of how their trading strategies might perform in the future and whether they are worth pursuing.
The biggest benefit of backtesting is that it can help you find a trading edge. Once you have that edge, you can turn it into a rules-based strategy that removes emotion from the equation.
When you rely on gut instinct or emotional responses, it can often lead to impulsive decisions that can be costly.
People who trade crypto and have a plan with tested signals are less likely to change their goals or abandon their strategy.
There are three main ways to test a crypto trading strategy:
1. Manual backtesting
Manual backtesting means looking at charts and prices, or data in Excel, to see how a strategy did in the past. It can be done by traders who don't know how to program, but it’s time-consuming.
2. Backtesting with code
Some traders choose to write their own backtesting algorithms. They often use a programming language called Python to do this. This language is easy to learn and there are many libraries available that can be used to develop backtesting systems.
3. Backtesting tools that automate the process
If you're not a programmer, the thought of writing code to test your trading strategies can be daunting. Fortunately, there are a number of software tools that can automate the backtesting process, so you don't have to write a single line of code.
Serious crypto traders will look for a backtesting tool that offers the following features:
Accurate historical price data
In order to backtest a crypto trading strategy, you will need clean and accurate historical price data for the cryptocurrencies you plan to trade. Without accurate price data, your backtesting results will be meaningless.
A wide variety of indicators
A good backtesting platform will offer a wide variety of indicators, so that you can test your strategy across a range of different market conditions. This is crucial for developing a robust and effective trading strategy.
Rich analytics to help you optimize your strategy
The best platforms will offer a wide range of metrics, so you can really drill down into the details of your strategy and see where improvements can be made. Ideally an extensive range of the analytics output comes in the form of graphic visualizations.
There are a number of reasons for crypto traders to choose Tradewell as their backtesting platform of choice:
Tradewell makes backtesting crypto strategies easy with its no-code interface. All traders need to do is input their parameters and Tradewell will do the rest. This not only saves time, but it also makes it easier for traders to experiment with different trading ideas.
Diverse Time Intervals
The platform is a fit for crypto traders with a long-term or short-term time horizon. With Tradewell, you can backtest your strategies on intraday, daily, and weekly time intervals.
The platform offers a library of thousands of indicators that can be used to backtest your crypto strategies.
Hundreds of cryptocurrencies
The platform features multiple data sources providing accurate historical data for hundreds of cryptocurrencies.
We also provide a range of analytical tools to help you understand the results of your tests. With Tradewell, you can be confident that your trading strategies are based on sound historical data.
Free to Get Started
The Tradewell platform is free for any trader to use, with no upfront costs or commitments. Traders can start backtesting their strategies immediately.
Start with the free version and then upgrade once you need to run backtests with longer lookback periods or against an expanded set of metrics.