The Ins and Outs of Bactesting a Currency trading Strategy

The Ins and Outs of Bactesting a Currency trading Strategy

One of the the great advantages about Foreign currency trading is that you can back test your approach. Strategy backtesting is a very simple procedure when the Metatrader 4 is used as your trading platform. The Metatrader4 is one of the finest Forex trading platforms ever created and is readily available from any Foreign currency broker.

Backtesting may be simple but there are few rules you should follow. and the most vital of these rules is not to use data from a generic supply. All statistics must be obtained from your broker server. Regrettably most people pay no attention to this and head straight to the Metatrader history download center where all data is in reality obtained from third party servers. The data from third party servers differ very much from the one you can readily have from your own broker server, thus your bactesting outcome are not dependable and should not be considered in determining the success of your Forex approach.

Obtaining data from your broker server is actually very easy and readily free. All you have to do is keep your chart on the M1 time frame, once you have this access to that the other time frames are much less difficult to get when you temporarily switch your chart to the other extended time frames. This is a fact since there is so much data in the M1 time frame. The instrument worth changes more than 30 times per minute and as there are so many minutes per day you can imagine the size of data needed to cover few months in the m1 time frame. Only a fifth of that amount of data is required on the M5 period and so on for the other longer periods. So once you have the data for the shortest time frame the others time frames are very simple to calculate by your investing platform if not already loaded by brief switching to the extended periods on your Forex charts.

Above and beyond having your Forex trading chart on the shortest time frame you should also scroll back your chart in the weekends as distant as you can. Forex brokers leave their servers on for you most of the weekend and throughout those times the Forex market is usually closed for trading and the servers are not overloaded. The weekends are the best times in the week to scroll your charts back to obtain as much data as you perhaps can directly from your broker server so you can backtest you Forex plan.

Another rule you should follow is that you fuse to most recent times. Forex market adjusts its actions rapidly and nothing that have been effective years ago would work in the present day. so it creates no sense to get data for the very old times. you should concentrate on the last few months only, in fact this makes things easier for you. Since it is nearly not viable to get truthful reliable data for all time frames for ancient times. You should focus on getting a full set of data for a particular Forex currency for few months back without interruptions all the way to the day in which you do your back test.

The third and the closing rule I would like to talk about that you should keep in mind when it comes to backtesting Forex in Metatrader is this: Do not try to take a short cut. A lot of people who are fresh to Forex trading perform backtest of failing Expert advisors within minutes and get winning outcome. Even if you use the most vigorous workstation a back test on Metatrader 4 would take few hours to ample, and that even without using the visual mode in which you could see the trades and the price movements on the chart. The speed of the movement in a simulation is highly dependent on your computer memory and processing strength. Metatrader Backtesting must always be done based on every tick of market data or your back test is nothing but deceptive. The more open trades overlap and a trailing stop is used the more is the processing needed by your CPU and thus the longer the time a back test would take. So why rush a good thing, Start your backtest properly and leave it to take its course while you are doing whatever thing you like to do, In the end of the test Metatrader 4 will hand you the full statement that can look at and study, so you can then modify your options and go for the next backtest, and so on and on. Eternally.

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