I would like to start a discussion on the optimization options that are currently available in MT4 (not the actual implementation of the GA used for optimization, which should be a topic for MT5).
In its current version MT4 has 3 “models”:
1) Every tick (claims to be the most precise optimization method)
2) Control points (described as a very crude method)
3) Open prices only (if expert uses opening prices only)
To start with, option 2 is totally useless and should be disregarded for backtesting.
I would like to challenge the claim that the “every tick (the most precise method)” is actually the most precise when it comes to backtesting of trading strategies. First of all
I will make an assumption that the historical data that the backtester uses is correct, otherwise further discussion is pointless. Since the finest time frame MT4 can use for backtesting is one minute that is by definition the most precise actual data available. The “every tick” algorithm simulates the tick data within the finest time frame available (i.e. 1 minute) which can be extremely incorrect during large moves after news announcements. Since the tick distribution within 1 minute bars is MT4-algorithm dependent you are likely to see changes from one software build to another.
In my opinion the most precise method to back test is to put your EA on 1 minute time frame (using opening prices only) while programming the EA to use user-defined time frame for indicators (15, 60 min, etc.).
The next question I propose to discuss is the usefulness of time frames longer than one hour (up to a day or so). The reason for it is that the bars longer than one hour are broker-dependent and GMT+1 broker will have 4-hour bars quite different from GMT+2 broker which makes an EA that depends on such a time frame very time-zone dependent.
In its current version MT4 has 3 “models”:
1) Every tick (claims to be the most precise optimization method)
2) Control points (described as a very crude method)
3) Open prices only (if expert uses opening prices only)
To start with, option 2 is totally useless and should be disregarded for backtesting.
I would like to challenge the claim that the “every tick (the most precise method)” is actually the most precise when it comes to backtesting of trading strategies. First of all
I will make an assumption that the historical data that the backtester uses is correct, otherwise further discussion is pointless. Since the finest time frame MT4 can use for backtesting is one minute that is by definition the most precise actual data available. The “every tick” algorithm simulates the tick data within the finest time frame available (i.e. 1 minute) which can be extremely incorrect during large moves after news announcements. Since the tick distribution within 1 minute bars is MT4-algorithm dependent you are likely to see changes from one software build to another.
In my opinion the most precise method to back test is to put your EA on 1 minute time frame (using opening prices only) while programming the EA to use user-defined time frame for indicators (15, 60 min, etc.).
The next question I propose to discuss is the usefulness of time frames longer than one hour (up to a day or so). The reason for it is that the bars longer than one hour are broker-dependent and GMT+1 broker will have 4-hour bars quite different from GMT+2 broker which makes an EA that depends on such a time frame very time-zone dependent.