Mastering the Art of Backtesting with MetaTrader

Backtesting is the process of evaluating a trading strategy or model by testing it on historical data. It involves simulating the application of the strategy or model to past market conditions and evaluating the performance of the strategy or model based on the results. Backtesting can be a useful tool for traders and investors to assess the potential risks and returns of a strategy or model and to determine whether it is likely to be successful in live market conditions.

There are a few different approaches to backtesting, including manual backtesting and automated backtesting. Manual backtesting involves manually applying the strategy or model to historical data and evaluating the results by hand. This can be a time-consuming and error-prone process, but it can be useful for getting a sense of how a strategy or model would have performed in the past. Automated backtesting involves using software to apply the strategy or model to historical data and evaluate the results. This can be much faster and more accurate than manual backtesting, but it may not be suitable for all types of strategies or models.

Backtesting can be an important part of the trading process, but it is not a foolproof method of evaluating a strategy or model. It is important to keep in mind that past performance is not necessarily indicative of future results, and that backtesting results should be taken with a grain of salt. In addition, it is important to consider the limitations of backtesting, such as the fact that it is based on historical data and does not take into account the effects of market changes or changes in the strategy or model.

Backtesting in MT4

The Strategy Tester in MT4 is a tool that allows you to test and evaluate the performance of an EA (Expert Advisor) on historical data. To access the Strategy Tester, go to the “View” menu and select “Strategy Tester” or press Ctrl+R. The Strategy Tester window will appear at the bottom of the screen.
There are several options that you can adjust in the Strategy Tester to customise your backtesting:

Once you have adjusted the options to your liking, click the “Start” button to begin the backtesting process. While the backtesting is running, you can monitor the progress in the “Journal” tab. Once the backtesting is complete, you can view the results in the “Results” tab.
Here are some things to look for in the test results:

It’s important to keep in mind that backtesting results are not a guarantee of future performance. There are many factors that can affect the performance of an EA, such as market conditions, spreads, and execution speed. As such, it’s always a good idea to test an EA on a demo account before using it with real money.

By default, MetaTrader 4 (MT4) uses a simulated tick algorithm to generate prices for the innermost 1-minute (M1) bars. However, it is possible to import real tick data into MT4 using a separate application or script. EvoAI is a tool that allows users to quickly and easily access high-quality tick data for forex markets and import it into MT4. It also offers fast download and export speeds for added convenience. Download EvoAI

Walk-Forward Backtesting

Walk-forward backtesting is a method of evaluating the performance of a trading strategy or model that involves dividing the data set into training and testing periods. The training period is used to build the model or strategy, while the testing period is used to evaluate the performance of the model. The key difference between walk-forward backtesting and traditional backtesting is that the model is re-trained and re-evaluated at periodic intervals using new data. This process is repeated for each period in the testing data set.

There are several benefits to using walk-forward backtesting. First, it helps to ensure that the model is robust and able to adapt to changing market conditions. Second, it allows for a more realistic assessment of the model’s performance, as it takes into account the fact that real-world models need to be updated and re-evaluated over time. Finally, it allows for the optimisation of model parameters, as the model can be re-trained and re-evaluated with different parameter settings to find the best combination.

Overall, walk-forward backtesting is a valuable tool for evaluating the performance of trading strategies and models, and can help traders to better understand the potential risks and returns associated with their strategies.

Backtesting in MT5

To backtest a trading strategy in MetaTrader 5 (MT5), follow these steps:

Once the backtest is complete, the results will be displayed in the “Tester” window. There are several key metrics to look for in the results:

By analysing these metrics and others, you can get a sense of how well the EA or strategy performed during the backtest period. It’s important to keep in mind that past performance is not necessarily indicative of future results, and that backtesting results should be taken with a grain of salt.

MetaTrader 5 (MT5) is able to take advantage of multiple CPU threads and networked computers to speed up the testing process, but it can be resource-intensive, especially for long-term tests that use a high number of data points (called “ticks”). This can lead to the consumption of a large amount of memory for each CPU thread. While this can be beneficial for some types of tests, it may not be practical or cost-effective for all users.

Installing Expert Advisors

To install an expert advisor (EA) in MetaTrader 4 (MT4), follow these steps:

Alternatively, you can install an EA by double-clicking on the EA file in Windows Explorer. This will open the MT4 platform and automatically install the EA.

Keep in mind that not all EAs are compatible with MT4, and some may require additional setup or configuration before they can be used. It is also important to exercise caution when installing EAs, as some may contain malicious code or perform poorly. It is always a good idea to thoroughly research an EA before installing it and to use it at your own risk.

Expert Advisor Optimisation

To optimise an expert advisor (EA) in MetaTrader 4 (MT4), follow these steps:

The optimisation process will run through a series of iterations, testing different combinations of parameter values to find the optimal settings for the EA. When the optimisation is complete, the results will be displayed in the “Tester” window. You can use the “Results” tab to view the profit, drawdown, and other metrics for each iteration. You can also use the “Graph” tab to visualise the performance of the EA with different parameter settings.

To apply the optimal parameter settings to the EA, click on the “Expert Advisors” tab in the “Navigator” window and drag the EA onto a chart. In the “Inputs” tab of the EA’s properties window, you can enter the optimal parameter values.

Keep in mind that optimisation is not a guarantee of future performance, and that it is important to carefully evaluate the results of the optimisation before making any trading decisions. It is also important to note that optimisation can lead to overfitting, where the EA is optimised for a specific data set but performs poorly on new data. To avoid overfitting, it is a good idea to use a separate data set for optimisation and to test the EA on out-of-sample data.

EvoAI is a tool that can be used to optimise expert advisors (EAs) for the MetaTrader 4 (MT4) platform. One of the key features of EvoAI is its ability to optimise EAs much faster than MT4 by using all CPU cores.

In MT4, the optimisation process runs on a single core by default, which can be slow for complex EAs or for optimisation over a large data set. EvoAI solves this problem by using all available CPU cores to parallelize the optimisation process. This allows EvoAI to significantly speed up the optimisation process and find the optimal parameter settings for an EA much faster than MT4. Download EvoAI