My Trading Problem
I was struggling to take trades that I learned from books and courses. The reason I was nervous pulling the trigger was because I was not confident in how the trades worked or if they would work at all.
But what could I do?
For me the answer was simple, I had to practice and backtest these strategies. However, it was difficult to find a forex backtesting software solution that suited my needs.
MetaTrader is OK for testing automated systems, but I wanted to find a system that would simulate actual market conditions by allowing me to add indicators, step through each candle/bar and take trades as the signals came up.
This what I really needed because it is tough to go back through complete charts and try to simulate what I would have done in a particular situation. Sure, I could use a piece of paper to uncover the chart slowly to simulate the market unfolding, but my arm got tired and it was hard to write down the trades and hold the paper at the same time.
All joking aside, I read about all these famous traders doing a lot of backtesting before trading real money or client money. But how could I do it without paying an arm and a leg?
Other Forex Backtesting Software Solutions
Don't get me wrong, when I was looking around, there were a few really good systems out there for doing backtesting. The trouble was that they either only did automated tests, were really expensive, or had a monthly subscription fee.
I would have been in the hole a several hundred to a few thousand dollars before I was able to come up with a trading technique that would actually start making money.
My Big Ah-ha!
Then I went to a Rob Booker workshop and he told us that he considered himself a full-time backtester and a part-time currency trader.
Many of his most successful students and himself included, were successful because they did a TON of backtesting. Interesting, I might be in the right place…
And as it turns out, I was. He had found this program called Forex Tester and it is how he and his students tested trading strategies to find trading techniques that worked best for them.
I was so excited that as soon as I got home from the class, I downloaded the program.
It definitely lived up to my expectations.
Here are just a few of the benefits of Forex Tester 2:
- The program is very affordable – It is just a one time fee, NO monthly billing. At the time of this writing, it only costs $199. I wouldn't be able to even buy the historical data for other programs or other subscription based forex backtesting software programs would only allow me to backtest for 1-2 months for that amount of money. Update: I've worked out a discount for you to get a $20 off coupon, if you use this link.
- You can add your own custom indicators (you can either find them online, program them in or find a programmer to do it for you)
- You can see multiple time frames individually or you can have multiple time frames up at once.
- You can get free, high quality historical data to test with directly from their website.
- The program allows you to not only have multiple windows open with different time frames in the same currency, but you can have multiple windows with different currencies. This will allow you do test for market correlations or practice hedging techniques.
- You can save your testing projects for review later.
- After you are done testing, you can double click each trade in the history log and the program will automatically move the chart to that trade. You can then scrutinize your trades and find any common elements that can make you more profitable.
- You can try this forex back testing software for free before you buy.
- You can write notes on every trade so you can go back later and sort your trades by type.
- You can export your trade log for analysis in Excel or any other program.
- Automatic upgrades when new versions are released.
- The program keeps a running total of several important metrics like: largest winner/loser, winning percentage, max drawdown, etc.
- And much more!
The best part about this software is that now I don't have to take someone's word that a trading technique works, I can test it for myself.
How Do You Actually Backtest?
I got this question quite a bit, so I decided to create a free course on how to do backtesting. Fortunately, Rob's course taught me everything I needed to know about getting started backtesting, but I realized that other people would not have the benefit of that instruction.
Some of you are probably wondering WHY you should backtest. Here is a video showing you why. They are both 1 hour charts on the AUDJPY:
As you can plainly see, backtesting will give you much more practice than sitting in front of the charts for weeks or months.
There is no replacement for actual live trading, but backtesting can give you the confidence to take (and stick with trades) and an idea if the method you are trading has a chance of being profitable or not.
Testing your strategy is not a holy grail that will make you a better trader overnight, but it can help you a lot.
Hi,
Great article, thank you!
As for me, backtesting is the simpliest way to check how the strategy would perform in long term perspective while Forex Tester allows you to make it even easier. Most of all I like its interface that is quite user-friendly, so you can do everything you need just after a few hours.
Newer versions (FT3 in particular) are also very comfortable. Actually, they improved almost all important elements
Agreed
Can we use Mt4 indicators (.mql4 and .ex4) files in the forex tester?
Looking forward for your reply
Regards,
No, you need a different type of file.
Hi Hugh,
Great article. I’ve been using it for 6 months now and I’m totally addicted to it.
But I think my biggest problem is that the price data used is different from what my broker (alpari) offers. So this makes it nearly impossible to replay your recent trades accurately on forextester.
What is the best solution?
Hi Bee,
Thanks. Forex Tester has a feature where you can download broker specific data, I think Alpari is one of the available brokers. Check it out.
You can also go back in your Metatrader charts and press F12 to move forward candle by candle. That would allow you to replay more current data. You would have to paper trade it, but it is an option.
Hugh
Hi Hugh,
Thanks for sharing , before I look into this further can you tell me how much historical data would be available, for example, if I want five or even ten years of 240 minute candles?
Thanks
Hi Damien,
All the data they have starts in 2001 and goes to the end of the current previous month (ie Feb. 28, 2013, as of today). It is in 1 minute increments, which will roll up to any time frame above that. Check out “Data Sources” on their site for more information.
Cheers,
Hugh
Hi Hugh, nice website.
Question: How long does it take to backtest a year’s worth of data trading daily bars?
I downloaded a free forex tester but the candle’s move too slow for my liking. Thanks for the feedback.
Hi John,
Depends on the system and how many trades. You probably tried this already, but if you didn’t…move the speed slider at the top to the right and that will speed up the bars. I did have issues in the past where the demo version was really slow, but the paid version was fine. Not sure if that is the case, but when I test, the fastest speed is always a little too fast for me.
Hope that helps!
Hugh
Hugh, what is the difference between your forex back testing course and forex tester 2 and say using it on stocks or commodities?
thanks.
Hi Gary,
Forex Tester 2 is just one of the software packages that you can use to backtest Forex strategies. My course teaches people how to get started with testing…where to find systems to test, learning what works with their personality, ways to possibly improve a system, stuff like that.
I use Forex Tester 2 as the example because that is what I am personally using, but people can still use the information in the course with Ninja Trader, Tradestation or any other software product.
I’m not sure what kind of software is available in other markets like stocks and commodities. There is backtesting software available in those markets, but I have never used them and from what I have seen, historical data can be a little expensive. Historical data for Forex Tester 2 is free and is updated monthly, but the program itself does cost money.
Hope that answers your question.
Cheers,
Hugh
Success is often measured by the effort one puts forth and at Forex,
it is important that each person has the same equal opportunity toward success.
Forex makes it possible for anyone to succeed in the process of trading and with their online tools,
one can feel confident that he possesses the knowledge necessary to become a competent trader.
what is the best software or tools to analyze forex trading chart? thanks
If you are backtesting, I would say Forex Tester 2. If you are live trading, then Metatrader.
Hi,
I wonder if this program works for my purpose. I have setups which I enter manually and set a stop loss manually. What I like to do is testing different exit strategies based on these entries. So would the programm allow me to test for example the two fold of my chosen SL? Or a ATR as SL and a crossing in moving averages as exit?
Nice blog btw and good luck for your trading.
Regards
Christian
Hi Christian,
Thanks for the kind words. Yes, this should be very good for what you want to test. It will allow you to manually take trades and set your entries and exits.
If you have any doubts, I would try the free demo download that they have. It will allow you to run through one month’s worth of data and test the software.
Let me know if you have any other questions and I will be happy to address them.
Thanks,
Hugh
Hello everybody, i surely like to positively commit within Currency, truthfully i’m a real absolutely newb. Do just about anyone knowledgeable about the right Software package or perhaps a professional brokering service, that should be able to teach me personally? My partner and i do understand, the markets is extremely high risk, nonetheless we both have lots of funds currently and also would have significantly more. So , anyone has any kind of guideline in support of us? We’ve searched however the cost actually are truly big due to a few broker companies.
Hi Edwardo,
I would check this out, it has helped me tremendously:
http://robbooker.com/
Good Luck,
Hugh
No problem, I would be happy to help you. First of all, check out the videos on how to backtest here:
http://www.tradingheroes.com/forex-back-testing-software-placing-orders
They do not have sound, only instruction bubbles, so it still may be a little confusing.
What strategy are you trying to test? If you let me know, I can make a customized video just for you on how to start testing your strategy.
If I don’t hear from you, I will do a video anyway because there are probably other people out there who are a little confused as to how the software works.
Don’t worry, it took me a little time to get used to it too.
So look out for a video later this week or early next week.
Thanks for your comment!
Thats great but how DO you actually DO the backtest on Forex Tester?
Its driving me nuts as i am having a real hard time figuring out how to test my own stragedy.
Can you tell me how please?
Hi Des,
You were wondering how to do backtesting with Forex Tester 2 and I hope the information I provided you helped. If not, I have recently created a free course that goes into all of the different things you need to know when backtesting. You can sign up for it here:
http://www.tradingheroes.com/backtesting-course/backtesting-course-main.html
There are videos on how to set it up and do the testing.
Hope that helps!
Hugh