Improving the trading strategy is one of the aspirations of all the people who are dedicated to investing in this form of business. In this sense, relying on the use of data from Binance Futures, an effective strategy can be achieved by using the Backtest.
Theory and expertise count that in trading, a strategy that worked well in the past is likely to do the same in the future. In the same way, a strategy that presented poor results has a great chance of doing the same if it is applied again.
To take advantage of this, there is the use of backtesting, with the help of which an ideal strategy can be reached. This tool is used by a large number of traders, who use it to evaluate the entire environment before proceeding to bet their money.
Binance Futures offers access to your data
The use of backtesting is achieved by applying a specific strategy in past operations. With this, the effectiveness of it is evaluated. In that sense, operate with Binance Futures, allows to develop the backtesting in an optimal way, since it offers deep access to your data.
Consequently, according to the blog of this firm, Binance Futures offers “a broad spectrum of your data as crypto futures”. The same base covers all contracts, which allows “perform the Backtest and optimize your trading strategy”.
Likewise, the platform offers a database used in derivatives, such as Candle data, history of the financing rate, open interest and “trading volume for futures and perpetual futures contracts over multiple time periods”.
In short, the portal explains, users of Binance Futures, they can access a wide variety of options. Mainly, data in real time, as well as the historical market data of all crypto derivatives, available on the exchange platform.
This service, at the same time, is available for USDT and COIN margin contracts. In both cases you can access the tick data, while, for future contracts, at order-book instant.
What is the Backlist and what is it for?
The use of the Backtest is, in short, to make sure that something works well to proceed to acquire it. The aforementioned Binance blog, puts as an example the evaluation, research and test drive that people perform before buying a vehicle and, they affirm, that exactly the same happens in trading.
Before investing the money, the trader must do a Backtest, for which it requires a historical data, such as the one offered Binance Futures. Thus, you will be able to evaluate if your strategy is good, comparing it with past movements that have been made in the market.
It can be said that the Backtest consists of evaluating multiple strategies without putting capital at risk. In this way, it can provide a large number of options and statistical tools. Some of them can be:
- Net percentage of profit or loss.
- Evaluation of volatility percentages.
- Percentage of average losses and average gains per bars.
- Percentage of capital invested.
- Profit and loss ratio.
- Annual return.
- Percentage of return in relation to risk.
How to conclude if a strategy is good or bad?
Parallel to the list of statistics offered by the Backtest, presented above, there are two main ones. They must always be taken into account to know if the evaluated strategy is good or not. These are the overall profit and the risk margin.
For this, it is important to have the widest possible access to historical data, such as in the Binance Futures. Another important aspect that must be taken into account is that there are many programs with the help of which the Backtest to the different trading strategies that you plan to use.
It should be noted that, in general, all the software to perform the backtesting, have similar workings. They have two interface screens, one to place the strategy data, as well as the chosen time, and the second, shows the results.
The difference is that, according to one or another signature of the programs, whether they are paid or free version, vary in the amount of data that can be placed in them.
Some tips when backtesting
Before proceeding to analyze the data in Binance Futures To test a strategy, it is important to take into account a series of factors, some of them are shown here.
- Take into account the broad market trends during the period of time chosen to apply the Backtest.
- Taking the universe into account, if the strategy works well in the cryptocurrency market, it does not mean that it does so in the technology stock market.
- Combine the average profit / loss statistic with the ratio of both.
- Backtesting customization is very important, some programs come with default values. In such a case, all details must be secured for greater accuracy.
- The Backtest is not a 100% effective way, so it must be taken into account not to risk more than what one is willing to lose, even having obtained promising results in the evaluation.
Data to take into consideration
- Backtesting is a tool capable of offering a clear picture about the functionality of a trading strategy.
- To find out whether a trading strategy passed the Backtest, factors such as overall earnings and risk margin must be considered.
- A fundamental requirement for the Backtest to give a reliable result is to have full access to a history, as provided by the data from Binance Futures.
- Evaluating strategies with this tool is not 100% safe, so you must take precautions.
- Apart from access to historical data, to proceed with the backtesting, it is important to have analysis software.
The information and data contained in this work should not be considered, under any circumstances, as a guide to investing. Its objective is exclusively informative and didactic.