Although this tutorial is about back testing on trading view, you would learn backtesting with the MT4 strategy tester as I compared the two platforms in terms of their strategy testers.
Backtesting trading strategies involve using previous or historical price data to test the accuracy and reliability of a strategy.
Most traders tend to move from one strategy to another in an endless cycle.
This can be stopped by backtesting your trading strategy.
Every strategy has a flaw and losses will be incurred.
However, backtesting enables forex traders to recognize these flaws and work their way around them.
Importance of backtesting trading strategies
- The accuracy and risk to reward of forex strategies can be approximated before risking actual money.
- Backtesting trading strategies build confidence in a trading system due to the analysis of previous price data.
- Furthermore, a trading plan cannot be created without backtesting trading strategies.
Best Softwares for backtesting
Backtesting should not be done on a single currency pair, various pairs should be done to test the effectiveness of the strategy.
How to Do Back Testing On Trading View
TradingView is a good platform for backtesting trading strategies that is simple to use.
Installation is not required and charts can be accessed from every device while in sync.
A variation of charts to backtest can be found on this platform can be found, namely; currency pairs, stocks, and even crypto charts can be found on this platform.
To backtest trading strategies on this site, the ‘Bar Replay Feature’ is used.
The icon can be found on the horizontal toolbar at the top of your screen.
When the icon is clicked on, a pop-up menu appears;
The first icon displays a blue vertical line when clicked on.
Move the mouse cursor around to choose the desired period to backtest.
Consequently, price data after this horizontal line is removed.
It can be replayed when the second icon from the left is clicked on.
Also, the speed of the replay can be adjusted.
Cons of backtesting trading strategies on TradingView
Without purchasing the premium version of TradingView, the ‘Bar Replay Feature’ can only be used on daily charts.
Although a free trial is offered, it only lasts for 30 days.
Afterward, the premium version has to be purchased.
It costs a sum of $14.99 per month. Quarterly and yearly plans are also available.
Backtesting Trading Strategies With MetaTrader
MetaTrader was developed and released in 2005. It is still the most used platform by retail traders to this day.
The platform links brokers and retail traders.
Orders are placed on this platform and charting tools are available as well.
The desktop version of the MetaTrader platform has a ‘Strategy Tester.
This can be accessed on the main menu under the “View” section.
Then, an expandable window appears below your screen;
The currency pair to backtest is chosen, time frame and specific period of market prices can be customized.
Advantages of backtesting trading strategies with MetaTrader
The MetaTrader platform is completely free to use.
There are no restrictions on time frames to backtest. It can be used offline and chart templates can be applied.
Besides the Strategy tester, a variety of plugins can be installed.
Forward testing
Transitioning from backtesting to forecasting is especially important.
Technical analysis of live markets has to be done and trades are taken on a demo account.
To properly gauge performance, spreadsheet software can be used to journal your results.
These “results” should be used to create a trading plan.
Existing trading plans should be updated and improved.
This should be done for months until confidence in a trading system has been developed.
How to create a demo account
A demo account is a type of account offered by brokers and trading platforms. It allows traders to test services like spread, fees, etc.
Basically, every feature present in a live account is available on a demo too.
These accounts can be used to test strategies and gauge trading performance before moving to a live account and risking capital.
A demo account can be created by requesting one on your preferred broker’s site.
The login and password to the demo account for the trading platform of your choice are sent to your registered mail.
Summary: Back Testing On Trading View
Backtesting trading strategies should be necessary practice for every trader. It is time-consuming and exercising patience can be difficult because profits are desired as soon as possible.
In some cases, the strategy needs frequent chart time to refine trading concepts while in other cases; the forex strategy is simply flawed and unreliable.
Regardless of what the case may be, it is revealed through backtesting repeatedly and demo trading.
The forex market is a re-occurring sequence, study the charts frequently and build confidence to trade your plan. This is what separates profitable traders from non-profitable ones.
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