First you may use backtesting. Here you take your system and work out on paper how well it might have done on the recent historic market, i.e. The last six months or whatever period you choose. This does not take too long as you can quickly scroll thru historical charts attempting to find the signals that would have led you to make a trade if you had been operating your system live at that point.
Backtesting should give you an idea of whether a system has potential. Naturally the market is not going to repeat in precisely the same way so you should take into account the proven fact that you may have struck fortunate or unfortunate and picked a point when the system performed abnormally well or badly.
Because of this, it’s best to backtest over the longest possible time and maybe split your tests so that rather than testing, for example, one full year when the market could have been particularly strong or feeble, take the 1st quarter of year 1, quarter 2 of year two, etc so that you test one 3-month period from every year of four years. This gives you a good period spread without requiring you to cover four full years.
The second way to test forex systems is in a demo account. Here you are dealing with the live market but not using real money. This method is slower because you have got to wait for your signals to come up for real . On the other hand, it simulates real live trading methods with the possibility of slippage and other things which are not gong to turn up in back testing.
Remember that you can test many systems at the same time in a demo account, provided you keep separate records of their performance. Or you can use many demo accounts. In this manner you have a better chance of ending up with at least one moneymaking system at the end of your period of testing.
Forex demo accounts also have got the edge that you are developing your live trading talents and familiarity with a software platform and charting service at the same time as you are running your tests. This gives you solid real time coaching to prepare you at present when you go live with real cash. Most currency exchange brokers will provide free demo accounts which you may use to check forex systems.