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How to Automatically Mark Trading Sessions When Backtesting

It can be difficult to keep track of which markets are open when doing backtesting. Is it the Tokyo session or the New York session? Identifying this correctly can mean the difference between accurate backtesting and a waste of time. This indicator can help and the best part is that it is free.

Home / Backtesting / How to Automatically Mark Trading Sessions When Backtesting

By Hugh Kimura

There are trading strategies that are built around only trading certain market sessions.  Generally, this means trading the London or New York sessions, but some people also like to trade the Sydney Hour.

Whatever the case, manually backtesting these strategies can be especially tedious because you have to do the conversions in your head, on top of keeping track of the rules of the trading method.  This can lead to mistakes and inaccurate results.

How can we make this easier?

In this post, I'm going to share how you can  automatically mark off the market sessions that you want to test in.

This will allow you to concentrate on using the proper risk and following the rules of the system you are testing.

I will also show you how to setup your tests to the timezone you want to use (GMT, NY, local, etc.) from the beginning, so you have even fewer time related testing mistakes.

This is what it will look like:

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Example of Forex Tester 2 chart with indicator

If you want to mark off multiple time periods, you can do that too.  On top of that, you are not limited to just established market sessions.

Maybe you want to highlight only the times that you are able to trade before you have to go to sleep.  Or you might only want to trade during the times that both London and NY are open.

No problem!

So if this is something that you would find useful, the video below will show you exactly how to do it.  However, if you prefer the text version, you can read it after the video.

See Exactly When You Should Be Testing

As you probably know, my favorite backtesting software is Forex Tester 2, so that is what I am going use to demonstrate this.  Other software programs may have this capability, but this is what I use and recommend.

There are several free Metatrader indicators that can do this, so do some Google searching to find the one you like best.  Luckily Forex Tester 2 already has an indicator built in.

It is called the Time Box indicator and it will create a box around price action during the time that you specify.  To make use of this indicator, first click on the indicators button.

Add an indicator in Forex Tester 2 by clicking on this button

Then select the Time Box indicator.  It is near the bottom of the list, you will have to scroll down to find it.

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Where to find the Time Box indicator in Forex Tester 2

Then when the indicator properties window comes up, you can set the properties, depending on what information you want to see.

Time box indicator settings dialog box

This is how to set the parameters:

  • From hour:  The time that you want the time box to begin, full hours only.
  • To hour:  The time that you want the time box to end, full hours only.
  • Fill color:  The color that you want the box to be.  I have found that the darker colors are less distracting, but preferences will vary.
  • Display price range:  Setting this to Yes will show the number of pips in the price range.

This brings up one question though, how do you know what timezone your testing is set to?  In order to find this out, set Forex Tester 2 to History Mode and go to the menu and select Tools > Data Center.

Menu items to select

When you look at the next screen, concentrate to the time shift slider.  When you downloaded the data the first time, you probably had it set to zero.  This means that the data is in GMT.

If you want to set it to another time zone, then change it here by sliding the shift time slider to add or subtract hours from GMT.  Or you can just keep in GMT and change the Time Box indicator according.  This is probably the easier way to do it.  Then when you click on Update from server, the time zone of the data will be downloaded again and changed accordingly.

Update time settings when importing data

Finally, if you want to mark off multiple time zones at the same time, just add another Time Box and make it a different color.  Here is an example:

Mutiple indicators on the screen at once

Conclusion

I hope that this tutorial will make it easier for you to backtest a time based trading strategy.  The best part is that this indicator is already included in Forex Tester 2.

For more Forex Tester 2 tips, check out my other tutorials.

 

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Category: Backtesting Tag: Backtesting Tips, Forex Tester Backtesting Tutorials

About Hugh Kimura

Hi, I'm Hugh. I'm an independent trader, educator and researcher. I help traders develop their trading psychology and trading strategies. Learn more about me here.

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First posted: January 7, 2014
Last updated: March 30, 2020

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CFTC Rules 4.41 - Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Testimonials appearing may not be representative of other clients or customers and is not a guarantee of future performance or success.

 

 

 

 

 

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