Before trading the markets with real money, you must understand the risks involved. One of the best ways to assess the risks involved in the trading strategies you intend to use is by testing them over the historical data to observe the performance of the strategies in the past.
But how do you commit to realistic forecasts when gathering real data is too difficult or challenging? Can you trust simulated data for accurate predictions?
While observing historical performance is helpful, it is no secret that the future is never exactly the same as the past. Employing the Build Alpha simulator may address the problem.
Build Alpha is an excellent trading software that lets you build, test, and generate code for automated trading strategies without the knowledge of coding. The software lets you create hundreds of systematic strategies for stocks, futures, ETFs, Forex, and cryptocurrencies at the click of a button.
Created by David Bergstrom, it helps professional traders, institutional investors, and money managers create numerous strategies to meet their own risk criterion across asset classes. The money managers and traders can stress every strategy in mere seconds.
The simulator involves a computational technique to include certain statistical properties of trade to give insights into the future. It produces conservative and meaningful results which also tend to be really accurate when used as predictions.
Basically, the software works in three easy steps, SELECTION, SIMULATION, and ANALYZING RESULTS. It can be imagined something similar to taking inputs (long or short, market of choice, test dates, entry signals, exit criteria, in sample minimum trades, out of sample minimum trades, out of sample percent, fitness function) and running them through a simulator with included risks and market factors to finally get an analysis of the strategies.
The software searches the best combinations from the extensive and ever-growing list of entry signals based upon the user selected fitness function. It is extremely flexible as it can be applied to any situation provided the problem must be able to be stated probabilistically.
Build Alpha lets you make data-driven decisions by letting you see all the possible outcomes and assess the risks. The entry signals are run through a large number of simulations that project future outcomes under similar circumstances. In simple words, it determines how the input variability relates to output variability under a certain set of conditions.
The money manager or trader selects one of the fitness functions (winning percentage, profit factor, compound annual growth rate, net profit, drawdown, CPC ratio, correlation coefficient, etc.) while setting up the input interface. The software then optimizes the selected fitness function to create possible strategies to let you know what is best for your business to grow and prosper.
We make the best use of Data Sciences. What is Data Science? Nothing but an excellent way to interpret and extract meaning from data that requires tools and methods from statistics, machine learning, and humans of course!
The software also builds portfolios of strategies, stress test strategies, track correlations among strategies, etc. To explore more about the Build Alpha software, you can browse the official website.