Hi. I have devised a simple, rules based VWAP trading strategy. It seems to work pretty well on all the instruments. I have simtraded it a little, and now I am ready to begin serious backtesting.

My idea is to use Ninjatrader "market replay" and test (and shadowtest) 3 or 4 ATM strategies. I will enter the results into a simple Excel spreadsheet along with simple things like time of day, day of week price position relative to VWAP. The goal is to identify the best market conditions, and the worst ones.

Can someone who has been through this process please tell me if this is a good way to spend my time? What am I missing, or what can I do different?

Yes, you are on the right track. You did not say if your VWAP strategy is coded so that you may run many simulations quickly or if you need to run them manually on a replay or in a sim. Regardless, it takes a lot of time and work to back test -- just the cost of doing business.

The one "gotcha" of any back testing is that practically speaking, it is impossible to imitate live trading -- the entries, exits, and resulting stats will always be a bit different than real life. Regardless, back testing is essential so kudos for setting up and back testing your strategy.

To keep your testing time to a minimum I suggest you run the tests for the times of day you will most likely trade, or the times of days that are traditionally the most active -- i.e. opening bell to 11AM ET or "power hour".

I don't work with NT so I don't know it's capabilities. If it is possible to run your strategy via a script and mark all of the entries and exits on the chart, it can be extremely valuable to go over the chart looking to find any entries and exits that don't make sense -- especially if they cause large losses.

The hardest part of back testing for me is trying to keep in mind that I'm not looking for every trade to be a winner but only to achieve good win/loss and profit/loss stats. I have a tendency to look at the chart created by my back test and fiddle with the code in an attempt to make every trade a winner. At a point in time such actions become a waste of time. Look for good stats given your tolerance for risk.

Then take the strategy to the sim. I run two charts from the same data feed during "live" testing. On one chart I have the code for my strategy running and showing me entries and exits. On the second chart - the one running a sim -- I input the orders. It seems kinda silly to do this but I've found some glaring problems with my strategies through this exercise.

Then I take the strategy live with small size for twenty trades or more. Twenty data points is rock bottom for producing a "statistically significant" result. If it makes me money, I keep it and use it and then start the process all over again with improvements I've thought of.

lol - hopefully the above is somewhat useful. My apologies if I went over stuff you already knew.

Wow, this is great. No unfortunately I can't code my strategy. I am using a custom indicator and there are discretionary elements as well. With my skillset (or lack thereof) it's definitely better to just run the "market replay" and live trade the backtest, if that makes any sense.

I will pay particular attention to the times of day I want to trade! Thank you so much for taking the time to respond.

Yep ... makes total sense and if you don't code, that's that way to test. LOL -- if you count the amount of time one uses to code up a strategy and then test with it, I do wonder sometimes if coding the strategy really saves any time. I suppose it depends how often the strategy gets tested\used. but I digress.... good luck.