How to choose the right parameters for stock backtesting?

@zella 

1. Define your investment strategy or goal: Before starting the backtesting process, it is important to clearly define your investment strategy or goal. This will help you determine which parameters are most relevant for your particular strategy.
2. Choose the right time frame: The time frame you choose for backtesting can have a significant impact on the results. Consider factors such as your investment horizon, trading frequency, and market conditions when selecting a time frame.
3. Select appropriate indicators: Depending on your investment strategy, you may want to use different technical indicators such as moving averages, RSI, MACD, or Bollinger Bands. Choose indicators that are relevant to your strategy and have been proven to be effective in similar situations.
4. Optimize parameters: Once you have selected your indicators, you will need to determine the optimal parameters for each indicator. This may involve running multiple backtests with different parameter values to see which combinations produce the best results.
5. Consider market conditions: It is important to take into account prevailing market conditions when backtesting your strategy. Consider factors such as volatility, trends, and correlations with other assets when selecting parameters.
6. Utilize historical data: Backtesting requires historical data to analyze the performance of the investment strategy. Make sure you have access to reliable and accurate historical data that covers the time frame you are interested in.
7. Validate results: After backtesting your strategy with the selected parameters, it is important to validate the results to ensure that they are robust and not just a result of overfitting. Consider factors such as risk-adjusted returns, drawdowns, and consistency of performance.
8. Monitor and adjust: Finally, continue to monitor the performance of your strategy and be prepared to adjust parameters as needed. Markets are constantly changing, so it is important to stay flexible and adapt your strategy accordingly.