The Ins and Outs of Back testing a Trade Strategy

One of the the distinguished advantages about Forex trading is that you can back test your strategy. Strategy backtesting is a very simple process when the Metatrader 4 is used as your investing platform. The Metatrader4 is one of the best 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 go behind. and the most important of these rules is not to use data from a generic supply. All data must be obtained from your broker server. Unfortunately most people pay no attention to this and head directly to the Metatrader history download center where all data is in fact obtained from third party servers. The data from third party servers differ greatly from the one you can readily have from your own broker server, thus your bactesting results are not reliable and should not be considered in determining the success of your Forex tactic.

Obtaining data from your broker server is in fact very easy and readily available. 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 briefly 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 currency price varies more than 30 times per minute and as there are so many minutes per day you can see in your mind's eye the size of data needed to cover few months in the m1 time frame. Only a fifth of that sum 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 compute by your trading platform if not already loaded by brief switching to the longer 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 far as you can. Forex brokers leave their servers on for you most of the weekend and during those times the Forex market is typically closed for trading and the servers are not overloaded. The weekends are the most excellent times in the week to scroll your charts back to obtain as much data as you perhaps can openly from your broker server so you can backtest you Forex plan.

Another rule you should go behind is that you fuse to most latest times. Forex market changes its behavior in haste and not anything that worked years ago would work nowadays. 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 impossible to get truthful reliable data for all time frames for very old times. You should focus on getting a full set of data for a particular Forex instrument for few months back without interruptions all the way to the date in which you perform your back test.

The third and the last rule I would like to mention 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 new to Forex trading perform backtest of failing Expert advisors within minutes and get winning results. Even if you use the most sturdy workstation a back test on Metatrader 4 would take few hours to ample, and that even without using the visual fashion in which you could see the trades and the price movements on the chart. The speed of the movement in a simulation is highly reliant on your CPU memory and processing power. Metatrader Backtesting must always be done centred on every tick of market data or your back test is nothing but misleading. 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 correctly 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 adjust your alternatives and go for the next backtest, and so on and on. Eternally.