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What is Forward Testing?

Last Updated: Apr 21, 2015 02:34PM EDT
Forward testing involves testing the system to see how it reacts and how the code works in real time, on real live data. Not that we don’t trust computers… but we don’t. Who knows what sort of 1s and 0s could have swapped places and put some weird results into our back tested results.  Better to see the thing working in real time to confirm that the risk controls are as they should be, that the algorithm can handle the live data feed, and so forth.

On the iSystems platform, whenever a system is approved and added to the platform, forward testing begins. This out of sample test can help confirm the effectiveness of the trading strategy on today’s market climate and expose any problems inherent in the code. The forward testing shows in the equity curve graph and monthly performance table with a peach background.


(Disclaimer: Hypothetical Model Account Performance)

The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect investor returns. Please read carefully the CFTC required disclaimer regarding hypothetical results below.
 
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.
 
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