Forex Strategy Testing And Optimization Tools And Practices

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Trading Strategy Optimization with Smart Forex Tester (Example)

If you search Internet for Forex testing, top positions in the search results will be taken by trading simulators and popular MetaTrader Strategy Tester. Can we assume that any (or all) of them is all we need to test our trading strategy?

Our opinion is: by no means. Neither of these tools is efficient for Forex testing – as we see it. Read on if you are interested to know our explanation and our Forex strategy testing approach.

Otherwise, you might skip to the pages on Forex strategy testing software. You might also inquire why we don’t use Metatrader Strategy Tester but instead spending time on development of our own ultimate Forex strategy tester software suite.

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Why Forex Strategy Testing Is Much More Than Trading Simulation

Let’s start from the scratch. What is essential for Forex strategy testing? We bet many will immediately answer: Forex testing software!  Do you agree? You might also want to check what others think – take a look at our poll:

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We of course don’t object the fact that software is an important part of strategy testing (and we dedicate a substantial part of this site to Forex Strategy Testing Software). But what we can’t agree with – is that software is the most important component.

Forex Strategy Testing Software
Forex Strategy Testing Software Suite

We need to understand that even the very best testing software is only a tool. We can’t use it efficiently without a clear action plan.

Why We Need Methodology For Forex Strategy Testing

Let’s imagine you got the best Forex testing software available. And luckily, you also obtained the best possible market history data. What will you do next? Obviously, you will just get your hands dirty and start running your trading strategy against the data. But here the questions start to arise.

First, the data volume is enormous. Are you going to run tests against all of it? OK, suppose you have enough computing power to crunch all the data. Here arises the next question. Did tests pass of fail? Somehow we are afraid of the latter. What should you do? Let’s guess – change some strategy parameters and try again. Here we have more questions.

How many parameters does your strategy have? How long will it take to rerun tests for all their combinations? And how many strategies do you have? And the last question: what if a strategy loses overall? Though it is clearly winning for some paramers combination in some market conditions, and losing for some others? Is it a fail or conditional pass? In other words, should you risk your money with the strategy?

We believe you got our point. Along with software, we need Forex Strategy Testing Methodology. Surprisingly, it appears that the problem of evaluating quality of the Forex Strategies has not been addressed sufficiently. We haven’t yet seen publications covering that topic. If you happen to know some, please send us a link!

Classic Approach To Forex Strategy Testing

Using proven classic testing techniques help us get the guidance how to interpret the results and make decisions on the quality. With respect to market data, we use selected Test Scenarios to get sensible results within reasonable time. In addition, the quality of market data is crucial for testing. This is one of the reasons why we don’t use Metatrader Strategy Tester.

For maximum testing efficiency, we develop our own Forex strategy testing software and practices to test trading strategies systematically and more objectively evaluate their quality. Our tools and approach go hand in hand with development of our own Forex strategies, especially for price action trading.

Our testing software is developed for automated testing. The software is being designed to make trading strategy description easy. So that one doesn’t have to be a skilled software developer to write a strategy implementation. With the same approach we are going to implement automated merging of trading strategies and – as the ultimate goal – automated trading strategy optimization.

Last but not least – In our software, we are implementing interfaces to MetaTrader terminal. First of all, this is done so that any trading strategy we test can be used for real trading as well. The interface in the opposite direction is no less interesting – this makes it possible to use our strategy testing framework for Expert Advisor testing.

Forex Strategy Testing And Trading Automation

These two go hand in hand. Automated trading system in an excellent way to avoid human errors. But before we grant the robot the full power of making trading decisions, we must trust the implementation of the trading strategy it runs. In addition, compared to manual trading, strategy testing for automated trading system can be itself automated. Which implies much better productivity.

But more to it, in such a case we can use day trading setup to test trading strategies mostly intended for position trading.

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Our site is named after Forex Strategy Tester – our own Forex strategy testing software suite. (Note: we are currently productizing our software for its release to the public. You can influence! Please take part in the polls on the site and just give us your thoughts on the features and implementation).

About forexstrategytester.com

Having been testing Forex strategies for some time on our own, we decided to start this site. We want to share our ideas, tools and experience. But we also want to learn from others’ experience and ideas. So we would like to build a community of like-minded people who all will get a synergy from joining.

We see this very important. Forex is a very difficult business to succeed alone. There are many big powerful players in the market. We ordinary people will never have the resources they have. So we need to join our efforts and be smart, so we must be able to get our share.

Read more about us…

6 thoughts on “Forex Strategy Testing And Optimization Tools And Practices”

  1. Hi there,

    We are a forex company and we would like to provide you some high quality uniquely written articles/tips and analysis on Forex trading, could you please let us know if we should provide you our 1st article, you can take a look and let us know if you can publish that?

    Looking forward to hear from you soon!

    Cheers, Zahir

  2. Hello! TҺis is my 1st comment ɦere sօ I just աanted tо give a
    quick shout օut ɑnd say I truly enjoy reading throuցh your blog posts.
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  3. Disappointing to discover this was a University project.

    You don’t need to justify everything as if you are writing a thesis. Just provide the fully working item and some guidelines on how to operate it.

    When I want obtain a spade, I do not want an 50 minute lecture about careful selection of steel, and metalurgy of the grain structure of steel. Just provide the spade, and I’ll tell you if it doesn’t work.

    I spent the 50 minutes only to discover I couldn’t build a strategy.

    The fact it has been two years means 18 months has been wasted justufying what you are doing….just do it.

    1. Hello John, and many thanks for your feedback!

      we are working to support the strategy definition as EA.
      This should be available in the next major release of the Tester.
      This way, implementing the trading strategy will be considerably easier.

      In regards to the current strategy definition formalism, we are sticking with it and will continue its development as well.
      One reason for that is here: http://www.robotsforforextrading.com/forex-trading-strategies-breeding/

      Best regards,
      The Forex Strategy Tester Team

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