How do you validate that an EA is truly profitable?

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  • 21% (10)
  • 21% (10)
  • 38% (18)
  • 15% (7)
  • 4% (2)
Total voters: 35
 
Osmar Sandoval Espinosa:
  • Only backtesting on historical data
  • Backtesting + forward testing on demo
  • Testing on a small live account
  • Statistical metrics (Sharpe ratio, profit factor, max drawdown) as primary filter
  • I don't validate beyond simple backtesting

Get an investor password to an algorithmic trader's live account─the only way to avoid BS 100%.

Then crosscheck it against your own backtest of the same EA.

 
Ryan L Johnson #:

Get an investor password to an algorithmic trader's live account─the only way to avoid BS 100%.

Then crosscheck it against your own backtest of the same EA.

I do this to and i can confirm this is also for me the best sulution :)
 
Simply you have to wait at least 3 - 6 months so you can validate the EA real performance and tell if it's really worth it or not.
 
Ryan L Johnson #:

Get an investor password to an algorithmic trader's live account─the only way to avoid BS 100%.

Then crosscheck it against your own backtest of the same EA.

Yeap, I think the same about that, but I'm asking more in manner of the building process.

What is better to validate that an EA is trully profitable and not just a good graph on the strategy tester.

 
Alex Holloway #:
Simply you have to wait at least 3 - 6 months so you can validate the EA real performance and tell if it's really worth it or not.
Do you like demo or putting small amount of funds?
 
There is no point on testing it on demo. The trading environment is too flawless. No slippage.

Better to trade in a cent account for your forward testing and after a satisfactory result, move to a bigger account.
 
Osmar Sandoval Espinosa #:
Do you like demo or putting small amount of funds?
I personally do this:
New EA released on the marketplace ~ I test it on demo account for at least 3 - 6 months and in meantime I make sure to keep an eye on the EA live signal page ~ compare the results on my demo account ~ now if the results was kinda good for the first 3 months I switch to live account with real funds, if it's not I keep it on demo account for another 3 months. So 6 months in total for the validation.
That's how I mak my final decision whether investing in specific EA or not. 

If the EA has 6 months - 2 years live record then I go with live account, real funds immediately

 
Osmar Sandoval Espinosa:
  • Backtesting + forward testing on demo
  • Testing on a small live account
by checking long-term backtests across multiple market conditions, then comparing live results with the backtest distribution over the same period. If live performance converges with backtest behavior in terms of trade structure, frequency, and drawdown, that’s a much stronger sign of a real edge.
 
Osmar Sandoval Espinosa #:

Yeap, I think the same about that, but I'm asking more in manner of the building process.

What is better to validate that an EA is trully profitable and not just a good graph on the strategy tester.

For starters, the graph of the Tester is not the end-all be-all of the Tester Report. The Tester generates a boatload of statistics in that Report (Testing Report - Algorithmic Trading, Trading Robots - MetaTrader 5 Help). Additionally, there are several more expansive reporting utilities in the CodeBase and Articles. Familiarize yourself with each statistic and determine which ones are most important for your particular strategy and its weak spots.

If you have demo price data and live price data, be sure to test on live price data. You need to find a way to calculate your average live spread, slippage, and/or commissions. Some broker-dealers publish/advertise that information on their websites (excluding horrible numbers around the daily close/open). If you're already live trading a strategy, there are several utilities in the CodeBase and Articles for collecting spread and slippage statistics. You can then input those numbers into the Tester (a commission slot may or may not appear depending on your specific broker-dealer).

If you're testing on tick data, I recommend searching the Forum for how to accurately evaluate ticks in your code and backtest on tick data. If your strategy only uses OHLC data, this is more straightforward.

Regarding the building process, this is basically "the elephant in the room." I find that the standard timeframe charts generally present utter chaos. I'm a big fan of transferring price data from a standard timeframe chart into a smoothed custom chart, e.g., Renko, range bars, etc. I experiment with various brick/bar sizes until I see readily apparent swings in the price data. A "shortcut" to finding the right brick/bar size is Stanislav Korotky's Uniformity Factor indicator:

Code Base

Uniformity Factor Indicator

Stanislav Korotky, 2025.04.07 14:34

This is a simple analytical (non-signal, one-time calculated) indicator that allows you to test the hypothesis that price timeseries represent a "random walk", specifically Gaussian "random walk". This can help to construct a parametric transformation of price increments into evenly distributed, more stable and predictable time series, at least in terms of volatility.

If I don't get that "bingo!" moment where swings jump out at me on the custom charts that I've tried, then I simply move on to another instrument/symbol.

Only after that price smoothing process is successful and complete, do I begin to apply calculations and indicators to the custom chart. Remember, the underlying data is smoothed so the calculations/indicators applied thereto are inherently smoothed as well. My last building step prior to testing is writing an EA that analyzes the custom chart data and trades the standard symbol. There are several custom chart EA coding tutorials on the web.

 
Christian Paul Anasco #:
There is no point on testing it on demo. The trading environment is too flawless. No slippage.

Better to trade in a cent account for your forward testing and after a satisfactory result, move to a bigger account.
How long you like waiting until consider moving to a bigger account?
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