Backtest Any Stock Strategy In thinkorswim

Introduction

In this video tutorial, we will learn how to backtest any stock trading strategy using the thinkorswim platform. We will specifically focus on the moving average crossover strategy and explore different settings to find the most optimal results.

Step 1: Setting Up the Chart

To begin, we need to set up the chart on the thinkorswim platform. Remove any existing studies on the chart and adjust the time frame to a longer period, such as five years, for more accurate backtesting.

Step 2: Selecting the Stock and Adding the Strategy

Choose the stock symbol you want to test the strategy on. In this example, we will use QQQ (an ETF). Next, go to the "Edit Studies" option and select the "Strategies" tab. Here, you will find various pre-built backtest strategies. We will choose the "Moving Average Crossover" strategy and add it to the chart.

Step 3: Customizing the Strategy

Once the strategy is added, you can customize it according to your preferences. The strategy includes parameters like the fast length, slow length, and type of moving average (exponential, simple, weighted, etc.). Adjust these settings to experiment with different configurations. Additionally, you can toggle the "Auto" option for buying and selling to manually control when to enter and exit trades.

Step 4: Running the Backtest and Analyzing the Results

After customizing the strategy, you can run the backtest on the selected stock symbol. The backtest will show the trades made based on the strategy and their corresponding profits and losses. Analyze the results and assess the overall performance of the strategy.

Summary

In summary, the thinkorswim platform allows users to backtest any stock trading strategy. By adjusting the settings of the strategy, such as the moving average lengths and type, as well as customizing the buy and sell orders, one can optimize the performance of the strategy.

Keyword: thinkorswim, backtest, stock trading strategy, moving average crossover, chart, settings, strategy optimization, buy and sell orders.

FAQ:

1. Can thinkorswim backtest strategies on any stock symbol? Yes, thinkorswim allows users to backtest strategies on any stock symbol by adjusting the chart and adding the desired strategy.

2. How can I optimize my strategy using thinkorswim? You can optimize your strategy by experimenting with different settings, such as the moving average lengths and type, and customizing the buy and sell orders.

3. What is the benefit of backtesting a stock trading strategy? Backtesting allows users to assess the historical performance of a strategy, identify strengths and weaknesses, and make informed decisions about its future application.

4. Can I backtest multiple strategies on the same stock symbol? Yes, you can backtest multiple strategies on the same stock symbol by adding and customizing each strategy separately in thinkorswim.

5. Is it necessary to backtest strategies on different stock symbols? Backtesting strategies on different stock symbols is recommended as what works for one symbol might not work for another. Testing on multiple symbols increases the robustness of the strategy.