Building a robust trading strategy is essential to get ahead in the market MetaTrader . However, arriving at this point requires significant research and testing to see what the strengths and weaknesses of your trading strategy are.
Luckily, MetaTrader 4 has plenty of useful tools traders can use to test their strategies and identify pressure points and make adjustments wherever necessary.
Due to the tight margins that characterize the market, the returns of FX traders largely depend on the resilience of strategies and realistic expectations.
Keeping a level head and having a concrete plan is half the work when it comes to successful FX trading.
MetaTrader 4’s Strategy Tester features allow traders to analyze their strategies and make improvements, which can boost returns over time.
How to Use MetaTrader 4’s Strategy Tester
The primary use of MetaTrader 4’s Strategy Tester feature is to backtest Expert Advisors to assess the accuracy of the buy and sell signals they generate over time.
For example, by backtesting an EA on the EURUSD par over a period of one month, traders can see how many buy and sell orders the EA generates and what percentage of them prove to be profitable.
Knowing this allows traders to get a clear view of where there is room for growth in their strategies, which in turn allows for improvements to be made, boosting trading performance in the long run.
In the example above, we can see the EURUSD Expert Advisor backtested over a period of one month. Using MetaTrader 4, the results are aggregated in the Journal section of the Strategy Tester, which includes all the individual buy and sell signals.
Traders can use this data to adjust the settings of the EA to improve its chances of identifying more accurate buy and sell signals.
However, this can be harder than it sounds, as most Expert Advisors are pre-made and building one from scratch can take time and very solid knowledge of the market.
One major advantage of backtesting in MetaTrader 4 is speed, as traders can backtest years of data in a matter of minutes, which greatly saves time.
This time-saving aspect enables traders to evaluate numerous strategies quickly, helping them focus on the most promising approaches and avoiding strategies that may be less effective.
Steps to Improving Trading Performance Using the MT4 Strategy Tester
While using the Strategy Tester to backtest and improve trading performance can be difficult, there are a few key actions traders can take to increase their chances of success, such as:
- Setting a high modeling quality – a higher modeling quality gives more accurate data, but also increases the time required to conclude the backtest
- Choose the desired backtest mode – there are three different options for traders to conduct a backtest, such as: “Every Tick” (most accurate but slower), “Control Points” (faster but less accurate), and “Open Prices Only” (faster but less accurate). The viability of these depends on the time frame of the backtests. For example, a shorter backtest may benefit more from the “Every Tick” option, as opposed to a time frame that spans a year or more
- Optimize – If the results are not satisfactory, consider optimizing the parameters of your strategy. You can use the optimization feature in the Strategy Tester to find the best combination of parameters for improved performance
- Repeat backtests regularly – regularly adjusting and conducting backtests can help you identify points you may have missed before, or may help you find better settings for a more effective and accurate backtest
The key concept behind backtests is the improvement of accuracy. The more accurate an Expert Advisor is, the more a trader can generate in profits by using it and take advantage of the buy and sell signals generated by it.