Understanding Backtesting with Xstocks

Explaining Backtesting Like You're 10 Years Old

Backtesting is like a time machine for investors. It helps us see how our investment strategies would have worked in the past. It's like looking at old photos to see how cool we used to be!

The Benefits of Backtesting a Portfolio

Backtesting helps us make better decisions when it comes to investing our money. It's like practicing a video game before playing for real. We can see which strategies would have made us the most money and avoid the ones that would have made us lose.

Backtesting in the Context of Xstocks

In Xstocks, backtesting is all about following a set of rules. Imagine you have a list of rules for picking the best stocks. For example, you might want to choose the top 10 companies that performed the best in the last year, but they also have to be a certain size and have a certain amount of trading activity.

Xstocks helps you test these rules by looking back in time. It checks which stocks would have met your criteria for the past 12 years. Then, it runs your strategy every 10 days (or however often you choose) and calculates how much money you would have made or lost.

Here's the cool part: Xstocks doesn't look into the future; it only looks into the past. It's like a history lesson for your investments. At the end, it gives you important numbers like total performance, annualized performance, historical volatility, and something called the Sharpe ratio. A high Sharpe ratio is like getting an A+ on your investment report card!

Once you have a winning strategy, you can use it with your real money. Xstocks will even remind you when it's time to adjust your investments. It's like having a smart assistant for your finances!