You should learn how to produce a Strategy Tester Report on the MetaTrader 4 Platform for a back test as well as a forward test of your forex robot. If you don’t know a back test is done with the historical market data while a forward test is done on the demo account. Both these reports reveal a lot about the performance of the forex robot.
Reading The Strategy Tester Report:
Now, both these backtesting as well forward testing reports are arranged differently but essentially have the same stats. So, let’s discuss the most important stats that you should take a note of when looking at these two Strategy Tester Reports.
Total Net Profit: This is the Total Profit made during the test period. Ideally the higher the total net profit the better. Some new traders confuse this with total net balance which is not calculated in the strategy tester reports.
Profit Factor: This is a very important parameter. Profit Factor is the ratio between the Gross Profit with the Gross Loss. Ideally, the profit factor should be greater than 2. A profit factor of 1 means that the gross loss was the same as the gross profit meaning the robot made zero net profit. A profit factor of less than 1 means the robot is going to burn your money. While a profit factor of 2 and above means that the robot makes twice or even more from what it loses.
Absolute Drawdown: Absolute Drawdown tells you how much your equity went down below the initial deposit. For example, if you traded the strategy with a deposit of $1K, at one point the equity was $700 in your account, it means the absolute drawdown for this strategy was $300 at one point in time.
Maximal Drawdown: Max Drawdown is one of the most important paramaters of a strategy. Max Drawdown gives the highest percentage loss you suffered in your account equity. It is calculated by taking the difference between the account equity highest point or peak with the account equity lowest point or bottom. A max draw down of 10% means that this is the maximum loss that you can suffer trading with this strategy. Well, maximal draw down depends on your risk tolerance level. However, a maximal drawdown higher than 10% is not considered to be good.
Profit Trades (% of Total): This statistic gives you the percentage of trades that closed in profit. For example, if it is 70%, it means that 70 out of 100 trades ended in profit or you can say that the accuracy of the trading signals was 70%. However, a higher percentage of profitable trades doesn’t mean that the net profit was positive. What is more important is the average profit or loss per trade.
Average Profit Trade, Loss Trade: This statistic will give you the average profit for a profitable trade and average loss for a losing trade.
Modelling Quality: Modelling quality is very important. It gives you the overall consistency of the historical data used in doing the back testing. The strategy tester lowest timeframe is the 1 minute. What this means is that it does not know what happened during the minute. It will make a guess. This guessing can make a lot of difference with the accuracy of the test. Most of the time, you will find the Modelling Quality to be 90%.
How To Calculate The Expectancy Of A Forex Robot
Calculating the Expectancy of a Forex Robot will give you a fair idea how much profitable it can be over a large number of trades.The following formula is used to calculate the Expectancy:
Expectancy= (Profitable Trades Percentage)(Average Profit)-(Losing Trades Percentage)(Average Loss)
MetaTrader Back Testing And Optimization Course
Learning how to produce these Strategy Tester Reports plus how to calculate the expectancy of a forex robot will help you a lot in making your forex robot work. This MetaTrader Back Testing And Optimization Course is must for those who really want to risk their real money trading with a forex robot. Don’t forget to download the special report that shows how you can make between $20K to $50K per month with your forex robot portfolio starting with almost zero startup capital. This MetaTrader Back Testing and Optimization Course will also show you how to do back testing with 99% modelling quality something that many pro traders also don’t know how to do. This 99% modelling quality can make hell of a difference in knowing how your forex robot will behave under the live market conditions! Plus this MetaTrader Backtesting and Optimization Course will also teach you how to optimize the settings of any forex robot. This is something very important for you to learn.