Of all the paradoxes that exist in trading, the notion of âBack Testingâ could quite possibly use some âBack Testingâ of its own. The literal meaning of âBack Testingâ is rather self explanatory and actually defines itself with little explanation. âBackâ is referring to past occurrences and âTestâ, is a trial of a model. Regardless of the level of sophistication, rigidity, flexibility, or time frame of your model, you help to define it and ultimately accept it. You are simply testing a method against past occurrences and analyzing the results. Conventional wisdom supports that the result of such testing can be optimized, and when applied to the future, produce a positive expectancy. None the less, one obvious fact still remains. The market, which is what your modeling into, remains a variable. Upon further scrutiny though, a less obvious change also occurs. Your perspective. Unknowingly, you have begun to reinforce in your mind what should happen as a result of your positive experience in literal backtesting. Once satisfied with your results, your back tested model will still require one more trial. A trial by "The Here and Now.â You have learned the literal definition of back testing above. It is now time for âYou the Traderâ to learn the traders definition of back testing. In the traders definition of âBack Testingâ, âTestingâ simply means to put on the trade, as dictated by the system of your invention. "Testing" remains constant and mechanical as a function of your system. âBackâ, on the other hand, is actually a variable. Now with everything to your satisfaction and your methods in place, your back tested system triggers a trade and your day of discovery begins. This is what you can expect to discover. Everything you thought your system to be, wished it to be, hoped it to be, ever dreamed or believed it could be is absolutely irrelevant under a trial by âThe Here And Nowâ. Go back and read that again. Enter âBackâ, the variable of the traders definition of âBack Testingâ. Under a trial by âThe Here And Nowâ, once entered into a trade, you are given but 3 choices. But wait a minute. This is strange. None of choices are related to the literal definition of back testing, or the positive "perspective" from which you saw your trades resulting in. âBackâ (traders definition) becomes to mean..... 1) Back Off 2) Back Down 3) Back The Hell Out. Back Off: This refers to reduction of trading frequency. Back Down: This refers to reducing your share or contract size. Back The Hell Out: It means just that. Neither you nor your system are in the flow of the market. Get out and re-enter when conditions improve. Both yours and the markets. There in lies a paradox of back testing. From the traders definition of "Back Testing" you derive a finite and constant set of prepared responses on every trade, every time. From the literal definition of "Back Testing" you derive a deceptively skewed departure from "The Here and Now". You only see what should happen, not what could happen. Now ask yourself this..... If the correct response to any trade is a constant, regardless of all the variable methods, signal generators, systems, and market conditions, where does one find a constant? The answer is quite simple. You become the constant, constant "WITH" the market. It is one thing to say you trade the markets. It is something completely different to say you trade "WITH" the markets. If you have a bias, a belief, or behavioral response from the past, regardless of origin, of what the market will do, should do, or could do, you are not trading "WITH" the markets, you are trading your past perspective of the markets. The day you decide to trade the markets perspective in the moment, and not yours, is the day you will be trading "WITH" the markets. Oh, by the way. There is one more definition of âBack Testing.â This one is provided to us courtesy of the markets. It is for all those traders who choose to ignore the traders definition of back testing. The markets actually re-structure âBack Testingâ to âBacker Testingâ. Backer testing occurs when you, the trader, have to go out and find new âbackersâ to fund your account, the one you just blew up, as you chose to âtestâ your trading account for the sake of âBack Testing.â Literally, that is.