The backtesting period of a trading strategy refers to the period of time when historical market data is used to simulate and test the strategy. During the backtesting period, performance data of the trading strategy can be collected and analyzed to evaluate its effectiveness and quality.
Generally speaking, the length of the backtesting period should be long enough to include a variety of market environments and cycles, and to fully evaluate the performance of the trading strategy. Some professional traders and institutions may choose a longer backtesting period, usually three years or more. However, the length of the backtesting period also depends on the market and time period that the trader is interested in, and thus needs to be evaluated according to specific circumstances.
It is generally believed that a long-term investment strategy should go through a test of a bull market and a bear market in its backtesting period. For emerging markets such as cryptocurrencies, which may experience several surges or declines within a year due to their short history and volatile nature, a shorter backtesting period may be sufficient to evaluate the performance of the trading strategy.
In summary, the length of the backtesting period should fully consider the characteristics of the market and the nature of the trading strategy, and should include as many market environments and cycles as possible to provide reliable data and evaluation results.