Also, expert advisors may be backtested in Metatrader 4 or Metatrader 5 via the strategy tester function. Manual Backtesting. Of course, one. Results of optimization and backtesting. Euro-Yen hourly chart. "Breakout period" is 4, take profit and stop loss are 50, other parameters are standard. Download MT4 Bollinger Bands Breakout Expert Advisor Backtesting the expert advisor on the EUR/USD @ 1-hour timeframe shows an interesting result. BETTING ADVICE APPLYING
Broker MetaTrader Terminal There are notable differences between the MetaTrader terminal provided by MetaQuotes from their website, and the counterpart delivered by your specific broker. For example, the symbol properties, i.
These predefinitions are likely to be different from that which is directly relevant to your broker. It is possible to match the properties manually, such that the environment downloaded from MetaQuotes matches your individual broker, but the easiest and most reliable methodology would follow from a direct download from your broker.
Testing on Demo Accounts It is common practice to test a strategy on a demo account prior to release on a real account. Whilst this is a respectable precaution, there should be an additional testing phase on the real trading account.
This is primarily due to the different order book structure LOB of the real and demo environments. There will be slight variations in price and volume, which may alter the outcome of your strategy. For this reason, it is recommended to trial a strategy on a real account before increasing the capital. This is especially relevant within EAs utilising deep neural nets, for which the training set can provide an unrealistic view of projected performance.
One way of reducing the risk of overfitting is to split to testing period into a back-testing period and a forward-testing period walk forward test. This will allow for a strategy to optimise itself over the given back-testing period, and treat the walk forward test as new information. Following the back-test and walk-forward, it would be good practice to favour results with consistency as opposed to excessive returns in either period. Similarly, the maximum drawdown should be consistent between both results.
Sample size For any given test, it is crucial to apply a weight to the number of trades within the test. For example, for any two results, with different number of trades, but all other conditions remain constant, it would be sensible to favour the result with a greater number of trades.
Calmar Ratio There are a variety of useful statistical measures for portfolio analysis. Beyond the return and drawdown, it is sensible to consider the alpha, beta, Sharpe ratio and various other metrics. A measure we like to assess is the Calmar ratio, calculated as below. The 4-hour Japanese candlestick making the price should have a range greater than the period average true range ATR , to show momentum in the direction of a prevailing trend.
An entry is triggered if the price reaches 1 pip beyond the trend end of the candlestick during the next 4 hours. A stop loss is placed 1 pip beyond the other end of the candlestick. This is a good indication of a solid strategy: Breakout Entries I have always felt as a Forex trader that breakouts do not tend to work very well in trading Forex, compared to the way they work when trading stocks and commodities.
It also always seemed logical to me that the pullbacks in trends would have the most profitable entries, as the price logically travels the furthest from these areas in a trend. Once I constructed a breakout system with a lot of filters to find entries within a trend, I was surprised to find that the results were better than those for the pullback entries shown above.
The breakout system is as follows: Trade in the direction of the trend only using a 4-hour candlestick chart. The candlestick must have a high or low beyond the trend side of the previous candlestick. When the candlestick closes, the 10 period RSI relative strength index must be greater than 50 in an uptrend or less than 50 in a downtrend.
The range from high to low of the closed candlestick must be greater than the period average true range ATR. This might seem like a lot of filtering, but all it really does is make sure that the short-term and medium-term trends are aligned with the long-term trend when the trade is entered. The significance of the moving averages lies only in that they give a very similar result to the day RSI. Adam trades Forex, stocks and other instruments in his own account.
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It also allows simulation of slippage and running multiple MT4 instances at the same time from the same installation so you can run multiple backtests simultaneously. Tick Data Suite is not free, but it's price is quite reasonable. Saves Disk Space Tick data downloaded by Tick Data Manager is compressed using special algorithm so it takes less disk space. This means you can run multiple EA backtests and even EA optimizations at the same time.
Switch Time Zones Easily switch between time zones and DST settings without the need to re-download and re-convert the data. It is easy as selecting other time zone settings from the list. Custom Environments You can create custom backtest environments to match the settings of any broker or any trading account.
You can test how EA behaves with different leverage, minimum price distances, swaps, commissions, etc. Use Variable Spread TDS2 is the only software which allows to use variable Spread during the backtest and even customize it. This shows you how EA works in the trading environment close to real market conditions. Apply Slippage TDS2 has an option to simulate the slippage during the backtest. Slippage can be applies on entry, exit, SL and TP. This shows how your EA backtest results look like when price slips, which happens quite often in real life.
Let's setup your MT4 backtesting environment Before you can run any backtest you'll need to prepare your backtesting environment which is to download, install and configure required software. STEP 1. There's a free trial available if you want to test it before you buy. Any other computer applications for backtesting on MT4 does not have an option to use real historical spread. In the "Prerequisites" step you will be asked to install them and you should do that, otherwise, TDS2 will not work.
NET Framework 4. This is the historical price data you can use for backtesting. STEP 2. Once you are ready click the "Start download". Visit Now 3. TradingView TradingView, everyones favourite charting tool, has a backtest feature.
The tool is absolutely brilliant for technical traders looking to test strategies and refine their edge. Visit Now 4. MetaTrader 4 MT4 is actually one of the best tools for backtesting your forex trading strategies. The free MT4 strategy tester will show you the profitability, drawdown, profit factor, streaks and much more! Visit Now 5. Excel Microsoft Excel is actually one of the best tools for backtesting the forex markets.
Visit Now 6. Trend Spider Trend Spider allows traders to backtest data without any coding knowledge. The easy to use platform allows for any pairs, any timeframes and any strategies making it a useful tool for your trading toolbox. Visit Now 7. QuantHouse Quanthouse is an institutional level backtesting tool for quant and EA traders looking for huge amounts of backtest data.
The tool allows traders to run algos on years of historical data in minutes with QuantHouses Historical Data On Demand functionality. Although an amazing tool, for the majority of retail traders this level of data is going to be overkill! However, for algo traders, definitely worth checking out!
Visit Now Choosing A Forex Backtester When choosing a tool to help you backtest the forex markets, there are a lot of factors you want to consider. Although backtesting is, in essence, a very simple process, the quality of the data is extremely important. If anything is going wrong during the backtesting process, your results are going to be completely wrong and this could lead to huge losses in the live markets.
I actually know a trader that would be able to generate mind-blowing returns on their backtesting software. This was all due to the way he was backtesting data. I have personally used this for many years and I would say that the value for money is very much there.
MetaTrader 4 — MT4 is completely free to use! You can either download it directly from MetaQuotes or through your broker as the large majority of brokers will offer a white label MT4 platform to traders. QuantHouse — QuantHouse is institutional grade quality and the price points are not available on the website. Efficiency And Ease Of Use When it comes to backtesting, you will ideally be gathering hundreds if not thousands of samples to analyse.
The issue with this is the simple fact it can take a huge amount of time to actually complete a backtest task. Even to very experienced traders, a large data task can write off a week of trading hours. This is why efficiency is extremely important in your backtest tool… Soft4Fx — Soft4Fx is extremely user friendly once setup.
Forex Tester — Forex Tester is one of the most user friendly tools for backtesting the markets. TradingView — TradingView is efficient in some aspects and lacking in others. Opening trades, skipping to certain dates in time etc is all done very well and it looks very pleasant. MetaTrader 4 — MT4 is surprisingly user friendly and intuitive when it comes to backtesting. Therefore, you have to use Excel to document trades taken using one of the other backtesting solutions.
For instance, using TradingView to execute trades and Excel to track the data is one of the best ways to do a backtest in my opinion. TrendSpider — Trendspider is very efficient when it comes to backtesting. Reviews - What Are Traders Saying?
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