MetaTrader 4 backtesting: How to test a trading strategy
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MT4 backtest is a tool that helps evaluate a specific strategy by applying it to historical market data. MetaTrader 4 backtesting tells you if using that strategy to past price history has yielded good results. If a system has worked well in the past, it can help you confidently apply that result in the present. This article will show you how to backtest a trading strategy on MT4.
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What is Backtest on MT4?
When you enter the market to trade, you need to use a specific trading strategy to increase your profitable results. If you test those strategies now, it will cost you a lot of time and money to see if the results are working. However, on the MT4 trading platform, you can use the tool to test your trading strategy using a method known as backtesting.
With the MT4 backtest, you can test the effectiveness of your strategies by applying them to the price history. If the MT4 backtest works and yields profitable tissue – that is, if your trading strategy has performed well historically – then you can use it to trade with confidence. However, if the backtest results in a loss, the system may also fail in actual trading.
The popularity of the MT4 backtest indicates that, to some extent, this strategy works for traders.
- See also: Articles about MT4 on Investiki.com.
Steps before testing a strategy on MT4?
Before starting to backtest a trading strategy, you need to ensure a few things.
First, you need to enable the Strategy Tester [Strategy Tester] feature in MT4 by selecting the View menu and [Strategy Tester].
Then you need to have the appropriate historical data for your particular trading symbol. MetaTrader 4 does not provide complete market data for every asset, which means the backtest will not be accurate. You can manually download data to your platform to fix it: You go to the [Tools] menu and select [History Center]. Then select the transaction code, double click on the code name, and enter it into the system when the data is displayed.
How to test a trading strategy with MetaTrader 4 backtesting?
To perform backtesting on MetaTrader 4, do the following:
On the [View] tab in the screen’s upper right corner, select the [Strategy Tester] feature.
Upload the Trading Strategy at [Expert Advisor] and click (Expert properties) to set the parameters as you like.
- In the [Expert properties], in the [Testing] tab, enter the amount for the initial trade, select the currency, and order type [Long & Short] to allow both buying and selling.
- In the [Inputs] tab, set the EA or indicator (Indicator) parameters you want to test. Enter the desired value for any parameter in the Value column. If you’re going to reset to default settings, click the [RESET] button.
- Next, choose the timeframe, and the type of backtesting. There are 7 different timeframes and three types of backtests: Every tick, Control points, or Open prices only. Every tick is the most accurate method for all timeframes available.
- You can choose the current (current) option on the Spread button or six different points (2, 5, 10, 30, 50 or 100 pips). For the best accuracy, you should choose the current option.
- Set a date range to test the strategy. Then you press the Start button to start backtesting on MetaTrader 4.
The results will be displayed in the [Results] tab of the Tester window in seconds or minutes, depending on the time frame you have selected, as well as the computing power of the calculator you use.
View Backtest execution results
After the backtest is done, you can view the results. The chart below shows the results based on the [Everytick] backtest, which is 99%.
In the [Report] section, you can see more details of the test results.
In addition, you can find a complete list of transactions generated during the test in the [Results] tab. To find errors in backtested strategies, see the [Journal] section. To start the trial again, go to the [Settings] tab.
The above is how you do backtesting using MetaTrader 4. The backtesting results on MetaTrader 4 will include the total amount used for trading, amount of loss, number of positions with profit/loss results… Thereby, you can get quite comprehensive information on whether the strategy has worked in the past. This will help you decide whether to use that strategy in real.
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