My Way Of Doing EA Back-Testing, Which I Think Is The Correct Way Of Doing Back-test

17 July 2017, 17:33
Hazly Harun

After I have done the optimization of my Expert Advisor, I will take the value or parameter which produce highest profit with lowest drawdown..

Example below:

As an example only

Then, I back-test it using M1 timeframe and back-test it month by month for that particular year. Yes, month by month not 1,2 or 3 or 4 or 5 year like most people do it. 

Why I back-test month by month?

This is what my friend who is also a forex expert said to me,

"If you run back-test 1 to 5 year, of course your capital will gain or increase because of the profitable trade.... never get as real as it is...Why? because during the real trade, while profit, your like to withdraw your money, does it.

If you withdraw , your capital will be lesser and the margin-level drop.

Let say, last month you withdraw money, and this month you have an open trade overnight, which is losing because the trend is not on your side and you forgot put stop loss..and you will get a margin call and cut losses.

So, the result is not the same during the time you do back-testing your EA.

By doing month to month back-testing you have a way better result (as real as it is ) monthly by monthly profit.

From there, you can plan when you want to withdraw your money after profit".

So, that why I prefer back-test month by month.. It is a time consuming process but I enjoy doing it, because I can find out which month give me bad result and I can outer the code and set value or parameter to get the best setting and result.  

Fyi, I only withdraw the money that is profit from the trade and leave the capital as it is. Same as doing EA back-testing month by month,which use the same amount of initial deposit...Get it what I mean ?

Why I choose M1 timeframe ?

1/- In my opinion, using M1 time frame will produce result that are similar to the real trading. 

2/- I found out that, when back-testing using M1 time-frame, if your EA making/showing  profitable result in this timeframe, rest a sure that in other time-frame it will also profitable.

After finish back-testing, I open a demo account and start forward trade using this EA. If it fail during the demo / forward testing, I'll start back coding the EA and modified it.

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