Trading on MT5 has always been appealing to most market investors. This appeal can be attributed to how heavily practical and effective the trading platform is. Automated trading allows investors to trade non-stop at any time, place, and day. At the same time, when trading manually, investors can access many network features to make things easier. Whichever route you choose as a currency trader, the strategy tester is a tool that will always come in handy. Here’s a look at how to invest using the MT5 strategy testing tool.
Backtesting in MT5
Backtesting is a strategy used by forex market traders to evaluate the performance of their trading strategy. It is used to run a strategy against past data and measure how it would have fared under previous market conditions. Ideally, the usual context in forex is that the market will always be volatile, so traders invest heavily in technical indicators and other analysis tools. The context of backtesting is for users to have more control and be able to measure how likely their strategies can succeed when used live.
MetaTrader 5 (MT5) is a trading platform that offers many benefits to traders, and one of these is the backtesting or strategy tester. The test mode comes with benefits that investors can always utilize to increase the likelihood of having a successful trade. Backtesting in MT5 can help traders identify profitable strategies, improve trading performances, save time, and eliminate emotional bias when used correctly. MT5 has varying testing modes depending on a trader’s preference and needs.
The “every tick” option is used to get the best testing accuracy, while “1-minute OHLC” is used to help those who are more concerned about speed rather than accuracy. After running the tests, results are obtained through a graphical display feature, which shows all necessary data, including profit/loss percentage ratio, risk factors, expected pay, and other relevant data.
How To Use the Strategy Tester in MT5
Here is a step-by-step guide to get you started:
- Open the tester. Go to the “View” menu on your MT5 trading platform. Select the “Strategy Tester” button.
- Select the trading instrument you want to backtest. You’ll see options like forex, stock, and commodities. Select the investment option you’re working with.
- Choose the timeframe.
- Select the “Expert Advisors” button and indicate your desired parameters. MT5 offerings like Every Tick, Control Points, and Open Prices are available here. Be sure to know how each one works because it determines how your order will be executed when you begin the backtesting process. Set other parameters like entry and exit rules, stop loss, and profit levels.
- Choose your testing period.
- Click on “Start” to initiate the process.
- Lastly, analyze the results.
Five Helpful Tips on Using MT5 Testing Mode
Use High-Quality Historical Data
We’ve established earlier that backtesting works by weighing how your strategy would have performed against historical data. So, when trading and analyzing your strategy, you need to have as much historical information as possible. Download additional data to have more information to test your strategy with. To download other data, go to “View” and then select “Symbols.” Select the currency pair, and click on the “Bars” tab. You can choose the timeframe of information you need on the Bars tab. Select the start and end date, and click the request button to download.
Optimize Your Strategy
You can do this by using the optimization feature on the platform to weigh different parameters and see as many possibilities as you can. Be sure to use this feature to perform a thorough test.
Evaluate Different Market Conditions
Trying your strategy with few market conditions is not enough. Evaluate different market possibilities to be sure of how reliable your trading method is.
Avoid Changing Your Strategy in the Middle of a Test
As tempting as it can be to change your strategy because you see a new advantage, it is never a good idea. When you make such changes, you’ll never know how good the initial would have been.
Stop Testing If the Results Are Too Obvious
At the same time, it’s wise to quit and save time when it gets too apparent that it doesn’t work. For instance, losing 80–90% of the account is enough proof that you must try other alternatives.
Optimizing Backtesting for Profitability
Traders who have found ways to make the most of it can identify more profitable strategies, improve their performance, and optimize their trading parameters. Now that you know how effective and helpful this tool can be for MT5 users, you could easily improve your current trading strategies. You also get to save time and know what works and doesn’t work before advancing into trading with real money.