History tends to repeat itself. So when you develop your stock trading plan it is imperative you “back test” your plan to see how it would have performed in the past. It should be tested in both bullish (increasing) or bearish (decreasing) markets to determine the plan’s performance. Back testing can display the risk you are taking with your money. Once you have a solid plan, you can change one rule at a time to see if you can improve performance. But remember you have to back test the changed plan in all different types of markets, all over again. It is a great way to “dial in” your plan by attempting to lower your risk and increase your rewards.
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