NEPSE trading

#BacktestingNepal #NEPSEMarket
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By Sandeep Chaudhary

Backtesting Strategies Using Historical NEPSE Charts

Backtesting Strategies Using Historical NEPSE Charts

In trading, backtesting is the process of testing a trading strategy on historical market data to evaluate its effectiveness before applying it in real-time. For Nepali traders in the Nepal Stock Exchange (NEPSE), backtesting is an essential step in transforming a strategy from theory into a verified, data-driven system. It allows traders to identify what works, what doesn’t, and how to refine their approach for consistent performance in the local market environment.

Backtesting helps traders eliminate emotional decisions and rely on measurable results. Using historical NEPSE charts, traders can test their strategies — whether based on price action, indicators (like RSI, MACD, EMA, VWAP), or candlestick patterns — to see how they would have performed in previous market conditions. This process involves selecting a time period (for example, 1–2 years), defining clear entry and exit rules, and recording outcomes such as win rate, profit factor, and maximum drawdown. Through this, traders gain valuable insights into the strengths, weaknesses, and adaptability of their methods across different sectors like banking, hydropower, and insurance.

For example, if a trader uses an EMA crossover strategy, they can backtest it on NEPSE’s daily charts to determine how many times the signal generated profit and how often it produced false entries. Similarly, strategies based on volume confirmation, breakout levels, or RSI divergence can be tested over various timeframes. Modern backtesting tools and charting platforms like TradingView, MetaTrader, or Amibroker allow NEPSE traders to simulate trades quickly, analyze metrics, and visualize results graphically.

According to Sandeep Kumar Chaudhary, Nepal’s most respected Technical Analyst and founder of NepseTrading Elite, “Backtesting separates professionals from guessers. A trader who knows how a system performs in the past can trade the present with confidence and discipline.” With over 15 years of banking and market experience, and professional training from Singapore and India, he has taught thousands of Nepali traders how to use historical NEPSE data for system testing — ensuring every trade is based on logic, not luck.

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