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How to validate a strategy

  • #1
  • First Post: Aug 7, 2010 1:23am Aug 7, 2010 1:23am
Hello All,

How does everyone here validate their own strategies (entries, exits, etc)?

1. Do you manually go through historical FX charts and paper-trade.
2. Trade live using a demo account.
3. Use the System Tester in MT4.
4. Something else?

Just interested.....
  • #2
  • Aug 7, 2010 1:37am Aug 7, 2010 1:37am
I only speak for myself.

I look back over the past 18 years for my strategy. Recently I acquired tic data, so smaller timeframes will be easier to test.

Someone like Ronald_Raygun is probably a good person to chime in on this one.
  • #3
  • Aug 7, 2010 2:40am Aug 7, 2010 2:40am
I code the strategy into a simple EA and then backtest it using the MetaTrader 4 Strategy Tester.
  • #4
  • Aug 7, 2010 3:43am Aug 7, 2010 3:43am
It depends what kind of strategy you are using. If the main thing in your strategy is indicators then AD is great thing to use but if your strategy is something like Price Action then back testing manually is much greater thing then trying to write AD for it. It's just my opinion .

Best regards,
Ignas
  • #5
  • Aug 7, 2010 4:00am Aug 7, 2010 4:00am
I do only manual backtest, mainly playback, it is something between normal backtest and demo account, but more fast, so you can test 1 year during 1 month...

IMO advantage this method is that you will develop a feel for movements, and in real trading you will have more self-confidence ;-)
  • #6
  • Aug 7, 2010 4:25am Aug 7, 2010 4:25am
Quoting petertrader
I do only manual backtest, mainly playback, it is something between normal backtest and demo account, but more fast, so you can test 1 year during 1 month...

IMO advantage this method is that you will develop a feel for movements, and in real trading you will have more self-confidence ;-)

Thanks for the reply. May I ask what software you use for performing playbacks?
  • #7
  • Aug 7, 2010 4:29am Aug 7, 2010 4:29am
Quoting enivid
I code the strategy into a simple EA and then backtest it using the MetaTrader 4 Strategy Tester.

Cheers for the info.

If I may ask, whats the MT4 Tester like to use? In your opinion, does it have any limitations? I ask, as I'm new to MT4 and have recently read somewhere that its quite unreliable.

Just interested in your thoughts...

Thanks....
  • #8
  • Aug 7, 2010 4:32am Aug 7, 2010 4:32am
Quoting Chorlton
Thanks for the reply. May I ask what software you use for performing playbacks?
MT4 ;-)
  • #9
  • Aug 7, 2010 4:41am Aug 7, 2010 4:41am
Quoting petertrader
MT4 ;-)
Thanks..... I'd better take another look....
  • #10
  • Aug 7, 2010 12:09pm Aug 7, 2010 12:09pm
I manually backtest it too. I write down the entries and exits and subtract the average spread for each trade at the end. If it proves profitable I'll go to a demo account for some time.
  • #11
  • Aug 8, 2010 2:15am Aug 8, 2010 2:15am
Quoting Chorlton
If I may ask, whats the MT4 Tester like to use? In your opinion, does it have any limitations? I ask, as I'm new to MT4 and have recently read somewhere that its quite unreliable.
The main drawback is that you have to code your strategy and do it right to get the correct test results. There are also limitations for testing strategies with SL and TP as the ticks are modeled in MT4 and the modeling quality is never perfect. MT4 testing is good when you enter and exit your position at opening of the bars.
  • #12
  • Aug 8, 2010 6:31am Aug 8, 2010 6:31am
Quoting petertrader
I do only manual backtest, mainly playback, it is something between normal backtest and demo account, but more fast, so you can test 1 year during 1 month...
Peter,

Would you mind explaining in more detail how you perform a playback? Is it part of the Strategy Tester?

I've taken a look but can't seem to find what you're referring to

Thanks in advance....
  • #13
  • Aug 8, 2010 9:20am Aug 8, 2010 9:20am
Quoting Chorlton
Peter,

Would you mind explaining in more detail how you perform a playback? Is it part of the Strategy Tester?

I've taken a look but can't seem to find what you're referring to

Thanks in advance....
Click on the strategy tester, and fill up every fields at your convenience (dont forged fill up visual mode), click start. Before strategy tester you can save up your own label, and during the strategy tester you can load it up. :-)

hope this helped
  • #14
  • Aug 10, 2010 12:16am Aug 10, 2010 12:16am
Quoting petertrader
Click on the strategy tester, and fill up every fields at your convenience (dont forged fill up visual mode), click start. Before strategy tester you can save up your own label, and during the strategy tester you can load it up. :-)

hope this helped
Thanks Peter..... I'll take a closer look at the Tester.........

All the best......
  • #15
  • Aug 10, 2010 8:47am Aug 10, 2010 8:47am
Test test and test.

Then test some more.

Once you've finished testing, then test it again.

Finally, test.
  • #16
  • Aug 10, 2010 8:51am Aug 10, 2010 8:51am
Don't forget to test!
  • #17
  • Aug 10, 2010 8:54am Aug 10, 2010 8:54am
Apologies for my over exuberance people....
  • #18
  • Aug 11, 2010 12:43pm Aug 11, 2010 12:43pm
Anyone else finds testing really hard? When I see a huge rally I missed I go back in the chart and 'fit' my strategy so it will get that rally. What basically I do is not testing at all, I find it very hard to do because of this... Testing this way is more like improving the strategy than testing, isn't it?

My question is: How do you test a daily strategy? Demo will take very long because many trades are needed to validate a strategy. The other option is manually checking the charts, which seems impossible >:
  • #19
  • Aug 12, 2010 2:05am Aug 12, 2010 2:05am
Quoting Jasus
Anyone else finds testing really hard? When I see a huge rally I missed I go back in the chart and 'fit' my strategy so it will get that rally. What basically I do is not testing at all, I find it very hard to do because of this... Testing this way is more like improving the strategy than testing, isn't it?

My question is: How do you test a daily strategy? Demo will take very long because many trades are needed to validate a strategy. The other option is manually checking the charts, which seems impossible >:
Use MetaTrader strategy tester for that. Long-term strategies are usually tested quite accurately with it.
  • #20
  • Aug 12, 2010 2:50am Aug 12, 2010 2:50am
Quoting witsnpips
Test test and test.

Then test some more.

Once you've finished testing, then test it again.

Finally, test.
It is important but donīt overestimate testing :-) , nothing will improve you faster than practice with real money, but do it untill you will be profitable on demo account
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