To learn the assets and the liabilities of the system. To identify how potentially different timing indicators combine with one another to produce a potentially effective trading system. Since the time and expense of real-time testing a new trading system are considerable, it follows that computer testing is the most efficient method for determining how a system would have performed in the past. The main purpose of testing systems is to learn what might work best in the future based on what has worked in the past. Do not, however, expect to find a 100 percent correlation between the past and the future.
Nothing is definite in the financial markets.
There are various important aspects, which must be considered when you test any trading system. If and when you buy a system from any vendor, find out how the system was developed based on the parameters that follow below. Number of Years Analyzed. The further back you test a system, the more representative of reality will be the results. The sad fact is that many trading systems and indicators do not withstand the test of time.