Will a backtest fail if a trade will blow my account?

I have an EA on MT4 that I have modified for my own needs and it looks great on a backtest. But will the backtest fail if I'm holding a trade that will blow my account?

Thanks!

A backtest simply tests your strategy against past price data. The only time it will "fail" (i assume you mean balance=$0) is if your exit conditions are not invoked and the price drop is sufficient to blow your account.

If you look at the "report" tab in MT4's strategy tester, you will see past max drawdown. the "MACD sample" EA in MT4 reports a 5.8% max drawdown which isn't bad, but isn't good imo. However, if you want to test POSSIBLE drawdown, you will need a monte carlo simulator...i'm not sure if someone has made one for MT4. Which, if you haven't defined money management, will be 100% possible risk.

If you define your stop loss as a % of account value, you'll be fine.

EDIT: rereading your post, it sounds like you're asking if the backtest has failed because of the graph you've posted...your graph,without the report, shows that given past prices, you will report profits. Also looks like you have a small downside risk. But no, a backtest can not "fail". You can only misinterpret it's results.

I think if you are backtesting, and the max drawdown is 100% you have a failure.

Thats just my take.

the important is forward test not back test

That's what I thought. Thanks for the response.

Also looks like your modeling quality is only 25%. There is now way you should put live money behind this, definitely forward test for a long while.

I am a rookie and was wondering what that 25% represented. I went to alpari and downloaded all the history for EURUSD M1 as far back as they had it. Why would my modeling quality be so low?

Thanks!
Laura

Did you use the history center from the tools option to install it?

1. we've all got a smooth baby bottom backtest with 25% modeling quality stashed away somewhere.... ugly reality when tested with 90% mq
2. your backtester will crash when equity hits zero
3. your backtester WILL NOT crash for a margin call....

in order to crash a backtester for a margin call, use this:

if(AccountFreeMargin()<0)
{

((code to close trades here))

}

that might not be the exact code, but the point is that you have to hard code it into the EA for backtests to run closer to reality.

open your history center (tools->hs) and look for EURUSD M1.... if you run your backtest from the earliest date you have M1 data for until the present, it will give you a 90% mq...

BUT

if you go beyond where your M1 ends, you will drop down to 50 or 25 or so...

I imported it as a csv file into the history center.

I did copy this from another expert that I liked:

if(AccountFreeMargin()<(1000*Lots)){
Print("We have no money. Free Margin = ", AccountFreeMargin());
return(0);
}

and I thought that would handle it, but wanted to know if it is just built into the strategy tester.

Thanks for the help!