Technically you can only do back testing if you have a pretty clear idea of what your trade setup looks like.

That means if, for example, the prior trend was the longer term timeframe is actually up, then the pullback happens and then I see a bullish reversal candlestick pattern and only on the bullish engulfing candlestick pattern.

If this is what I want to trade on obviously I want to back test this right okay.

So the easier way is that there is some software. I am not sure whether they are software that can easily do that already or not by looking in the past and help you find all the bullish and engulfing candlestick patterns. I do not know of any of that yet.

But what I do is that if I want to look in the past, I will just scroll back the history okay then after that what do you do, you just go to the earliest point in the history right then you just slowly move forward until you see visually you see that bullish engulfing candlestick patterns.

Then you don’t want to show too much of the front because you don’t want to know what it’s happening so the best thing is you keep the last day as you are moving through right at the right-hand side of your chart.

You slowly move through drag drag drag drag when you see the patterns happening assume that you’re gonna take a trade because of that pattern emerging as your part of your strategy right then you just say okay now it appears I’m going to pretend that I execute the trade based on a historical data, okay then you go and put it down–okay where is my entry level, where’s my stop loss level, where’s my profit target level.

Put in the spreadsheet then you continue to run the chart forward day by day day by day day by day then you will see day by day on a basis because all it’s already happened then sooner or later you’ll come to a point where either touches your profit taking or stop loss level.

Yes then we once with that, you write down on your spreadsheet okay I exited with a profit based on this bullish engulfing reversal candlestick stick pattern.

So you just keep on doing this. You will want to try to do this for at least this 30 to 50 trades.

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Philip Teo

Founder & CEO at Traderwave Pte Ltd
Philip Teo is an entrepreneur, speaker and trading coach who specialises in the field of Technical Analysis of the financial markets. He is currently the Founder and CEO of Traderwave Pte Ltd, a financial technology company that offers a web charting application to global traders. He has conducted many trading seminars and appeared on national television before. He is also currently an official speaker and trainer with SGX Academy. Learn more about him at his Google+ Profile, LinkedIn Profile and Facebook Profile

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