Here are some excellent books that cover manual backtesting, forward testing, and system development for traders:
1. General Backtesting and System Development
-
"The New Trading for a Living" by Dr. Alexander Elder
- Covers system rules, backtesting, forward testing, and trading psychology.
- Practical techniques for evaluating and refining a trading system.
-
"Trading Systems and Methods" by Perry J. Kaufman
- A comprehensive guide to building and testing trading systems.
- Includes detailed examples of backtesting concepts and performance metrics.
-
"How to Trade in Stocks" by Jesse Livermore
- A classic that highlights trading methods, risk management, and systematic trading discipline.
- Great insights into testing and improving a strategy.
-
"Design, Test, and Optimize Your Trading Systems" by Robert Pardo
- A must-read for serious traders focusing on robust backtesting, forward testing, and optimization.
- Discusses avoiding curve-fitting pitfalls and system validation.
2. Trading Strategy Development with Real Data
-
"The Art and Science of Technical Analysis" by Adam Grimes
- Combines technical setups, system rules, and systematic testing.
- Helps traders identify setups worth backtesting with an emphasis on price behavior.
-
"Building Winning Algorithmic Trading Systems" by Kevin Davey
- While focused on algorithmic systems, the concepts are excellent for manual testing.
- Practical advice on backtesting, forward testing, and managing drawdowns.
-
"The Evaluation and Optimization of Trading Strategies" by Robert Pardo
- Deep dive into validating a system through rigorous testing.
- Excellent for refining manual backtesting processes.
3. Excel for Backtesting
-
"Trading with Excel: Backtest Your Trading Strategy" by Samir Khan
- Explains how to use Excel to log, analyze, and validate trades.
- Step-by-step methods for tracking and improving trading systems.
-
"Financial Modeling and Valuation: A Practical Guide" by Paul Pignataro
- Not trading-specific but teaches powerful Excel techniques for analyzing data.
- Useful for backtesting metrics like risk-reward, drawdown, and win rates.
4. Journaling and Performance Analysis
-
"The Trading Journal and Performance Analysis" by Brett Steenbarger
- Focuses on the importance of maintaining a trading journal to improve decision-making.
- Discusses evaluating strategy performance through detailed logs.
-
"Trade Your Way to Financial Freedom" by Van Tharp
- Guides traders on testing systems, defining rules, and improving consistency.
- Emphasizes tracking performance for forward testing success.
These books collectively cover system development, manual backtesting, and forward testing while providing tools like Excel-based logging and real-life trading examples to help you test and refine your strategies effectively.