Posts Tagged ‘forex FAQ’

Testing strategies forex

Any forex strategy, published on this site or you invented before using it on a live account, you must first be tested on historical data and it is desirable for the demo and cent accounts, so we are today and discuss the issue of testing forex strategies. The more that I often novice traders forex asked this question: “What do you think has a right to life, my invented forex trading system …”
there are several
methods for testing trading strategies:

1) Visual method:
1 You set the schedule on your chosen currency pair all the necessary forex indicators with the necessary parameters, do the construction (if they are needed, and this strategy is based on graphical analysis of forex) or install a template MetaTrader 4 already prescribed parameters of indicators, and so.
2 Then simply flip through your chart to the left – on the history and begin to find the signals received by the rules of your forex strategy test. Thus you notice where and on what sites your strategy made ​​it possible to earn and what number of points, and gave only where losses.

3 Looking at the history so you can identify patterns of the forex market and in particular the consideration of the currency pair, adjust and make changes to the forex indicators and thus achieve better results when trading forex strategy.
4. visual testing strategy, you need to at least browse through the history of price movements for 6 months, and preferably 1-2 years!
Of course this is a very complicated process, but nonetheless spent a few hours on the calculation of profitability and optimization of forex strategy, you will save money on their real future trade.
I personally tested this way almost every strategy of this site (although I do not deny that at this point many of them have lost their relevance, but at the time of publication, they all make a profit), and the same method found a pattern strategy “Flag + ABC” and my own strategy.
2) Testing using forex advisors:
This is certainly the most simple method of testing strategies: you or your programmer creates Advisor (although this service is also very often paid), you run the advisor selling you on the trading system devised in the Strategy Tester of MetaTrader 4, select the desired time period in history, prescribe necessary parameters indicators forex advisor and he is testing you to strategy for the selected period.

If the results are not very good, then you change the settings, or pick up a forex indicators and ensure the profitability of your devised strategies. There is also an automatic process and the selection of the parameters, it is called optimization. That is, you specify the permissible scope “and from” everyone interested you start setting indicator and adviser on optimization. Strategy Tester independently pick the most profitable result and after a long process of optimization gives you its settings (although you can pick up the results of optimization and independently from the mass of the tested variants).
So you can most accurately test and optimize your strategy.
Recommended interval testing and optimization – from 6 months (at least!) To 2-3 years (desirable).
Now a few words about the testing and optimization in Metatrader 4:
1 Advisor to be placed in the folder “C: \ Program Files \ <name Forex Broker> \ experts \”, where the name – for example Forex4you or Metatrader 4 – <name of the broker>
2 Pre-and all the forex indicators that are used in the test strategy as well be placed in the folder “C: \ Program Files \ <name Forex Broker> \ experts \ indicators \”
More information about the testing of experts, see the video:

3 Note that if “modeling quality” after the test is not equal to 90% and the number of errors “Mismatched charts” is not equal to zero, then the test conducted is not entirely true! And the reason for such testing may not be a complete archive of quotations (with gaps in the history). In order to make it more complete, we must finish loading these quotes and carry out the test from the beginning!

I recommend to test all advisers, and therefore the forex strategy in the Alpari since this broker’s most comprehensive archive of quotations, today.
4 If desired, you can put a bird “Visualization” and you will observe how and when the deal happens, closing, and so.
5 Also desirable would be for testing using the “forward test” – a test that is conducted for the period for which you have not optimized Advisor! That is, if the optimization and expert testing conducted for the period up to the present day, and a few months earlier (eg 1.01.2012 to 1.09.2012 – the so-called back-test), then on the period from 09/01/2012 till today’s date – 16.12.2012 advisor should give the same profit with those obtained by optimizing the parameters advisor!
There are certainly a lack in this test method:
No opportunity to test graphics forex strategy, as advisers writing on them rather difficult task, as I understood from communication with programmers …
3) Testing on a demo account or a Cent account:
This method of testing is recommended to carry out after the 1st or 2nd method described above! This will allow you not to lose time (as forex signals may have to wait a very long time) and save albeit small, but still the money if you’re trading in the forex cent accounts.
If the strategy and post-test on the 3rd method gives positive results for 1-2 months and you follow the rules of money management, as well as the rules of money management, you can safely move to trade on the larger trade accounts and deposits.