Expert advisors are developed using programming languages and tested with MT4’s strategy tester. This program uses C-like language and a text editor to code. Strategy tester tests the program using historical data and outputs the results summary at the conclusion of testing. Users can pick the period of back-testing, currency to trade, time chart, and algorithm to test – visit us!
It’s the results of your back-testing that matter.
Expert Advisors can trade automatically for people without programming experience. Look at the results of backtesting before you put it on a live trading account.
The profit factor, or the return on investment is a very important result. The total profits divided by total losses is the result. Over time, any number greater than 1 is a positive factor. Due to current trading conditions, and market news releases, 2 profit factors are more desired. Multiple strategies are needed to back up anything between 1.3-1.8.
Max Draw Down
Maximum Draw Down is simply the minimum amount of capital you have at any given time. You can think of maximum drawdown as the amount in capital that is at its lowest point (realized and unrealized trades) during any given time. To avoid margin callout, this is a crucial setting. It is advisable to keep the maximum drawdown of an EA product at less than 20%. Anything between 50-21% is risky and must be correctly set in order to avoid margin calls. Above 70% is risky.
This number measures gross profit and loss as well as the length of the program. Your program will be more lucrative and successful if this number is higher. Any number higher than 100 or even 150 is likely to be profitable.
For most traders, it is essential to test the strategy with 12 months’ worth of data because this will cover the main news releases and the seasonal variations. Foreign exchange rates will fluctuate when fundamentals like non-farm payroll data or unemployment rate are released. Market will respond according to differences in forecasts. In the United States, Europe and Japan there will also be a big impact on volume. Forex prices will increase and decrease aggressively during holidays. This EA must be put to the test through all of these events.
The maximum and average loss
Losing trades are more important than winning trades for the margin call, and to set it up with another automated forex program. Instead of looking at EAs with zero losses or small losses, look instead at an average loss which is not more than your winning trade. Even though it may be a large loss, on average in the end you will see small loses.