Consider The Spread Before Buying An EA!!! - page 3

New comment
 
Christopher Fernandez Ledon:
True...but in the strategy tester that wouldn't work because you define the spread and then it's a static number.
If you set the spread in Strategy tester greater than the allowed max in the EA - it will not open a position at all.
 
Attila Moricz:
If you set the spread in Strategy tester greater than the allowed max in the EA - it will not open a position at all.

I believe the issue here is that someone who doesn't understand the spread setting in Strategy Tester could set the spread very low (thinking it is pips not points).

Even if the EA tests the spread, it will always pass in Strategy Tester.

Results look great. 

Now apply to a forward test and you will see major differences. 

 
honest_knave:

I believe the issue here is that someone who doesn't understand the spread setting in Strategy Tester could set the spread very low (thinking it is pips not points).

Even if the EA tests the spread, it will always pass in Strategy Tester.

Results look great. 

Now apply to a forward test and you will see major differences. 

That was the main point of this thread...to raise awareness of how the spread in the strategy tester can be misleading if not properly understood.

And yes Attila...you are very correct with your statement also.
 
Christopher Fernandez Ledon:
That was the main point of this thread...to raise awareness of how the spread in the strategy tester can be misleading if not properly understood.

And yes Attila...you are very correct with your statement also.

Sorry Christopher,

I missed your point. You're correct. The confusion between pip/point can lead to false results in strategy testing, indeed.

 
It really is too bad that mt4 didn't capture both bid and ask for each tick...then we could have a realistic spread to test with as it changes throughout the day.

Would be so much better than just picking worst static spread based on pair to use.
 
BTW, a spread of 7points is realistic, at least it is for EURUSD during daytime on most ECN accounts (not counting the commission into it).

You should always take a look on which pair will be traded and at what time. If the EA has an spread filter build into it, i would just test with the highest allowed spread. 
 
Attila Moricz:
Properly written EAs has defined maximum allowed spread to open a position. Above that it wont open a position.
Is the "spread" paid at the time of opening an order? Or at the time of closing it? My guess is that it is at the opening, since the "profit" of a trade is always a negative number at the opening time.

Best regards.
 

Spread isn't a charge like commission so I don't think the analogy of "paying" the spread is helpful for understanding what is going on. 

You open a buy order at the Ask price. You close your buy order at the Bid price.

The profit shown in the terminal is constantly updating as the Bid price moves (for buy orders).

The spread could change dramatically between opening and closing your trade.

 
This is why your trade will start with a loss as soon as it is open.  Spread is just something that's inherently built into the mechanics of trading this way.  

It's not something you "pay off" necessarily...it's there all the time.  If you want to see it graphically on your chart,  you can turn on the ask line in your chart properties and see how it fluctuates.
 
Guillermo: Is the "spread" paid at the time of opening an order? Or at the time of closing it?
  1. The spread is the difference between the Ask and the Bid. You buy at the Ask, sell at the Bid. So for a buy order you pay the spread on open. For a sell order you pay the spread when you close.
  2. That is why, for a buy, your TP should be relative to the Ask (includes the spread) and your SL relative to the Bid (spread already paid.)
1234
New comment
Reason: