Backtesting A Trading Strategy With Support And Resistance Areas
In this Montreal Forex trading vlog, I'm sharing a solution to backtesting a trading strategy that uses support and resistance areas (sometimes called zones). Vlog #195.
I personally use support and resistance areas in my own trading and found it tough to reliably backtest with them.
Here's a little bit of background…
After using a script to do backtesting in Meta Trader 4, I was stuck with the problem of reviewing all the results to see whether or not the trades took place at support and resistance areas.
I needed to find a solution to eliminate the trades that aren't happening at major zones on the chart. That would save a lot of time.
Solution: Backtesting A Trading Strategy With Support And Resistance…
I ended up working out a way to identify my zones first with a brush – something TradingView allows to do.
From there, I'll note with a line the new areas as they happen on the chart. I use a circle to signify the areas where I would be looking to enter a trade (i.e. once price would hit support and resistance areas for the 2nd time).
Since TradingView saves all the drawings made on any chart, it's easy to go back at the period where you identify the support and resistance areas on a lower timeframe to perform the backtesting.
I strongly recommend you watch the video to understand the process.
Have you performed a similar backtesting in the past? What have you put in place to backtest support and resistance areas? Comment below and let's start the discussion!
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