Expert Advisors are built using programming language. These advisors then go through MT4 strategy test. The language of the programming program is C. A text editor can be used to create code. Strategy tester uses historic data to test a program, and displays the final results. The User has the option to choose between the different algorithms, backtesting period length, website trading currency and time-period chart.
Test Results are important.
Expert Advisor is a code that allows people with programming knowledge to program any trading strategy. It will trade for them automatically. Check out some of the test results prior to putting them on your live account.
Profit factor. This is what you should be looking for. Total winnings divided by total loss is what determines this. Any profit factor greater than one will result in long-term profits. In the long run, anything more than 1 yields profit. You should use multiple strategies for anything in the range of 1.3 to 1.8%.
Max Draw Down
It is defined as the smallest loss the account has suffered at any one time. It is simply the absolute minimum of your account capital (realized or not realized profit trades). Your setting configuration is critical in order to prevent margin call out. The general rule is that an EA should not be more than 20% drawn down. Anything between 50% and 21% must be managed carefully to avoid margin calling. There is no risk in going above 70%.
This figure represents the total profit, total loss, initial deposit and duration. If this figure is high, your program will be better and more profitable. Almost anything above 100 to 150 can yield positive results.
Duration of Testing
Most traders will test their strategy on at least 12 consecutive months, since this includes major announcements and seasons changes. If fundamental news is released, like the Non-farm Payroll or Unemployment Rates, then forex prices are likely to change. Decreased volume during the United States holiday and Europe will affect forex rates. All of these events must be included in the testing for this year.
Maximal and Average Loss
The trades that I look at are not the ones where you win, but those in which you lose. These trades will help me to determine if it is worth a margin call or if another forex robot should be used. Do not use EAs which are losing little or nothing. Instead look for an EA with a loss average that does not exceed your previous winning trade. You may see large losses in the short term but on the overall, it is better to average the trades over time.