How to Backtest Expert Advisors in MT4 Strategy
Tester to Reach Every Tick Modelling Quality of
99% and Have Real Variable Spread Incorporated
MetaTrader 4 can reach 90% modelling quality at its best by default and it cannot incorporate real
variable spread. But there's a better way to run backtests.
Written by
www.Autotrading.Academy
Every Tick 99% backtest can expose strategies that promise good results in backtesting report and show their
weakness. Stay away from Expert Advisors that fail in this test to save
your time and money.
99% test is the most accurate test you can do on MT4. It basically
reveals how vulnerable and sensitive the strategy is to spread
changes, slippage and di〰〼erent price quotes.
If the strategy was created and tested in low quality backtesting
environment the 99% accuracy test will reveal its dark side before you
invest any money into it.
Why you need to test your strategies on "Every Tick" with real
spread and 99% modelling quality
Top 3 reasons to use Every Tick 99% modelling tests
99% modelling quality backtest basically shows the ugly truth and
reveals weak side of the strategy
Below are two backtests run for the same Expert Advisor. First backtest is of 90% accuracy and the
next one is of 99% accuracy.
It's obvious that this EA is not worth wasting anyone's time and money.
EURUSD history center data, default settings, 2010-2015
Rescue you from losing money
Unprecedented accuracy
Reveals the dark side of the
strategy
EURUSD history center data, default settings, 2010-2015
(Pic. 1) Expert Advisor shows tremendous pro艗ts on a 90% accuracy backtest
EURUSD Dukascopy data, default settings, 2010-2015
(Pic. 2) The very same Expert Advisor fails in 99% accuracy backtest
MetaTrader 4
It's obviously you'll need to have MT4 platform installed on your computer in order to run any kind of backtest using MT4 Strategy Tester. However, note that MT4 alone can reach 90% modelling quality at its best and it even won't have real spread incorporated. MT4 alone can only use 艗xed spread which gives inaccurate results.
MetaTrader 4 trading platform is free of charge and available at mostly any Forex broker.
Tick Downloader
You will need history price data for backtesting and Tick Download software is exactly what you need. It allows you download history price tick data from Dukascopy, which is free to use for everyone, and even converts it to your preferred timezone. Usually you want to convert the price data to the same timezone used by your broker.
Tick Downloader is free of charge.
Birt's CSV2FXT Script
You'll need CSV2FXT script to convert the Dukascopy history price data to a MetaTrader 4 format (.FXT 艗les) which are used by the MT4 Strategy Tester. This script has quite a big range of parameters which give a lot of
艕exibility when preparing your backtesting environment.
Birt's CSV2FXT script is free of charge.
Tick Data Suite
Tick Data Suite is the only paid software you'll need to reach 99% modelling quality. The software is quite easy to install and easy to use. TDS not only o〰〼ers 99% modelling quality backtests, but also adds real variable spread that have actually happened in the past, allows simulation of slippage, and running multiple MT4 instances at the same time.
TDS is the only software available for 99% modelling
Tools you'll need to perform a 99% modelling
quality Every Tick backtest
quality backtests with real variable spreads incorporated.
Tick Data Suite is not free, but it's price is quite reasonable.
How to prepare your backtesting environment?
Before you can run any backtest you'll need to prepare your backtesting environment which is to
download, install and con艗gure required software.
Download History Price Tick Data
First we need to download history price tick data. It takes quite a while to download full history data 艗les as they are quite large, so it's wise to start downloading them now.
Download & Install "Tick Downloader"
Download free "Tick Downloader" from here:
http://www.strategyquant.com/tickdownloader/
Start the installer you've downloaded and follow on-screen instructions to 艗nish the installation.
Usually it's wise to choose installation folder outside "Program Files" folder, like on a separate disk drive,
Desktop or your Documents folder.
Set Data Output Folder
Once you open "Tick Downloader" make sure you set your preferred data output folder in the SETTINGS window. I recommend you using separate folder or separate disk
drive as data output folder.
Select Pairs & Range
Select pairs you want to download price tick data for and then select the range. Usually I select "All Time", but obviously you can download smaller ranges if you need to. Note that full history price tick data 艗le (~13 years) comes in
CSV format and takes around 11 GB of disk space. If you'll convert the 艗le into di〰〼erent time zone then "Tick
Downloader" will create additional 艗le of similar size.
Choose Timezone & Download
Next click "Con艗gure" to choose your preferred time zone and make sure you select "Automatic export to CSV" so that
"Tick Downloader" create CSV 艗les automatically after tick data is downloaded.
After you set the parameters hit the "Start download" button and your data will start downloading. It will take
quite a while so be patient.
Tick Data Downloaded
Here's my history price tick data downloaded and converted into CSV 艗les.
EURUSD folder holds the tick data 艗les and additionally two CSV 艗les were created. One 艗le for default GMT-0 timezone
and the other for my chosen GMT+2 timezone with European DST enabled.
These 艗les hold history price tick data for 13 years and they take 22 GB of disk space. That's only for one instrument.
CSV 艗les can be deleted later after you convert them into MT4 FXT 艗les.
Download & Install MetaTrader 4 platform
Download MetaTrader 4 for PC, install it and create a demo account. For maximum convenience and easy of use install MT4 outside of the Program Files folder. Good idea to install on a separate hard drive, because history price tick data will use a lot of disk space.
Download & Start MetaTrader 4 installation
Download MT4 from your broker or directly from here:
http://www.metatrader4.com/
Once downloaded, execute the MT4 installation wizard, which is usually named mt4setup.exe
If you download MT4 from your broker the 艗le name might be di〰〼erent.
Follow MT4 on-screen instructions
Once you agree with the terms and conditions click the SETTINGS button to choose custom installation destination
folder.
Choose custom MT4 installation folder
This step is very important. You need to choose installation destination folder outside the "Program Files" or any other
system folder.
Best practice is to use external disk drive because history price tick data will use a lot of disk space. If you do not have
external disk drive you can simply install MT4 on your desktop or inside Documents folder as an example.
Enabling Portable Mode for MT4
After MT4 installation is 艗nished the platform will load in just a few moments. You need to close the platform for now and enable Portable Mode before you continue to use it. Do
not skip this step to make the whole process easier. Select Properties of your new MetaTrader 4 shortcut and then add /portable at the end of the text you'll 艗nd in the "Target" 艗eld. Click OK to save changes and double-click the
shortcut to start MT4 in Portable Mode.
IMPORTANT! From now on, start this MT4 only using this shortcut.
Choose MT4 server to create account
Once MT4 loaded you need to create a demo account. But 艗rst you need to select a demo server of your broker or simply add MetaQuotes-Demo server to the list by clicking
the "add new broker ..." and typing "MetaQuotes". Once the server appears on the list select it and click NEXT, select "New demo account" and click NEXT again and follow
on-screen instructions to 艗nish opening your demo account.
If you have an account already just click CANCEL and log into your account.
Log into your MT4 account
After login window appears enter your MT4 account number (login) and password to log into your MetaTrader 4
account.
MT4 accounts has two passwords (main and investor) and they both will work for converting history price data into
FXT format.
Install Birt's CSV2FXT script & convert price tick data to FXT 艗les
Download and install Birt's CSV2FXT script, copy CSV 艗les to your MetaTrader 4 folder and convert them into FXT 艗les. This is a special MT4 艗le format used by Strategy Tester module to perform backtesting of Expert Advisors.
Install Birt's CSV2FXT Script
Open the Data Folder of your MT4 platform from the top menu "File -> Open Data Folder" and then go inside "MQL4"
folder.
Now download Birt's CSV2FXT script into this folder from here: http://eareview.net/tick-data/downloads
Make sure you choose the latest script version for MT4 build 545 or higher. Birt's CSV2FXT script comes in three
艗les:
1) CSV2FXT.mq4 goes into \MQL4\Scripts\ 2) FXTHeader.mqh goes into \MQL4\Include\
3) CsvReader.dll goes into \MQL4\Libraries\
Refresh scripts list in MT4 Navigator window
Refresh scripts list in MT4 Navigator window
To make the CSV2FXT script appear in your MT4 without restarting the platform you need to refresh the scripts 艗le
list.
In the Navigator window click on "Scripts" and them "Refresh". This will update the list with all the recently
installed Scripts, Expert Avisors and Indicators. If Navigator window is not visible you can turn it on by
pressing CTRL+N or through the top menu "View ->
Navigator".
Copy tick data CSV 艗les into MQL4 Files folder
In the same Data Folder of your MT4 platform go inside "MQL4" and "Files" folder.
Now move your CSV 艗les here so that CSV2FXT script can see them and convert into FXT 艗les.
It's highly recommended that you move the CSV 艗les, not copy, but move them so that you do not create additional copied taking up additional disk space. Also moving 艗les is
faster than copying them and usually takes just several seconds.
Start CSV2FXT script and con艗gure
Attach CSV2FXT script onto EURUSD chart (because we convert the price data for EURUSD) and con艗gure. In the COMMON tab check the "Allow DLL imports" so that
the script can work.
Set CSV2FXT script Inputs
In the INPUTS tab set your desired parameters. Here's how I do this:
CSV 艗lename = EURUSD_tick_UTC+2_00.csv Create HST 艗les = trueUse real (variable) spread = true
CSV GMT o〰〼set = GMT+00 CSV DST setting = None Remove duplicate ticks = false
Create H1 FXT = true
There are parameters for each time frame, so you can choose the ones you need for your backtesting
environment and set them to "true".
For detailed explanation about each parameter refer to the author's website.
Answer NO after CSV2FXT script 艗nishes creating
FXT 艗les
After CSV2FXT script 艗nishes creating FXT 艗les it will ask if you want those 艗les to be moved to the right folders. Click NO. We will do this manually to avoid HST 艗les being
overwritten by MT4 platform and updated with the most recent price tick data from your broker server.
Disconnect from MT4 account
It is very important that you disconnect from your MT4 account at this stage, before moving the newly created FXT
and HST 艗les into designated folders.
This way you'll make sure MT4 does not overwrite price data with the one from broker servers.
The most convenient way for me to disconnect from MT4 account is to open Login window (File -> Login to Trade
Account) and add zero at the end of the login number.
You should see "Invalid account" message at the bottom right corner once disconnected.
Protect HST and FXT 艗les (Step 1)
It is very important to make HST and FXT 艗les read-only to protect them from being overwritten by MT4.
Open MT4 Data Folder again, navigate inside the \MQL4\Files\
and select all FXT and HST 艗les.
Protect HST and FXT 艗les (Step 2)
Open Properties window and set "Read-Only" attribute to these 艗les.
To make sure the "Read-Only" box is really selected, 艗rst you should clear it and then select.
Click OK.
Move FXT and HST 艗les into designated folders
In the same \MQL4\Files\ folder and sort the 艗les by "Type". You have a list of HST 艗les and FXT 艗les that needs to be
transferred to designated folders.
CSV 艗le can be removed now, but it is recommended to leave it in case you'll need to create FXT 艗les again.
Move HST 艗les
HST 艗les should be moved to the folder named:
\history\MetaQuotes-Demo
Note that instead of MetaQuotes-Demo you might actually see your broker's server name.
For example on HotForex MT4 platform this folder would be named:
HFMarkets-Demo Server
or
HFMarkets-Live Server2
This folder name should match the server name from the MT4 Login window where you've entered your login and
password previously.
Move FXT 艗les
FXT 艗les should be moved to the folder named: \tester\history
These are the 艗les MT4 Strategy Tester will use for back-testing.
This is it. You've converted and prepared history price tick data.
Install Tick Data Suite for MT4
Purchase and install Tick Data Suite software for your MetaTrader 4 platform. This software is mandatory for running Every Tick 99% modelling quality backtests with real variable spread incorporated.
Purchase & Download Tick Data Suite
Purchase & download Tick Data Suite from this website:
http://bit.ly/tickdatasuite
TDS is the only software available for 99% modelling quality backtests with real variable spreads incorporated.
Install Tick Data Suite
When installing Tick Data Suite simply follow on-screen instructions and leave the "Launch Tick Data Suite
Con艗guration" box selected at the end.
When you click Finish the con艗guration window will appear.
Activate and Connect TDS with MT4 platform
Activate TDS by entering your Serial number and clicking
Update.
Then click "Select Path" and select your MT4 platform which should be connected with TDS. Click "Copy TDS" and
then YES when it will o〰〼er to create a shortcut to this TDS instance.
Note: You can connect unlimited number of MT4 platforms on the same computer.
Enable Portable Mode for Tick Data Suite
After TDS is installed into speci艗c MT4 platform you need to enable Portable Mode before you start using it. Do not skip
this step to make the whole process easier.
Select Properties of your new TDS shortcut and then add /portable at the end of the text you'll 艗nd in the "Target" 艗eld. Click OK to save changes and double-click the shortcut
to start MT4 with TDS in Portable Mode.
IMPORTANT! From now on, start this MT4 with TDS only using this shortcut to enable 99% backtesting quality with
real spread.
Launch MetaTrader 4 with Tick Data Suite
Start MetaTrader 4 platform with Tick Data Suite using the newly created shortcut.
Once you will be prompted to login it is very important that you don't. Click Cancel. Never log into MT4 account unless
you need to convert the price data again. Take a look at the top of your MT4 window. If it says "MetaTrader 4 with Tick Data Suite" it means you've done it correctly and now your MT4 is ready for 99% backtest with
real spread.
Note: You can also launch multiple MT4 platforms with TDS and run multiple backtests, which is normally not possible
without TDS.
Running 99% modelling quality Every Tick backtest with real spread
Now you are ready to run Every Tick backtests with real spread incorporated and reach 99% modelling quality. Having real spread in your backtesting process makes your strategy test more precise.
Open MT4 Strategy Tester window
Backtesting of automated trading strategies (Expert Advisors) is done in the MT4 Strategy Tester window. You
can open it from the top menu (View -> Strategy Tester) or by pressing CTRL+R.
Select EA you want to backtest
Choose which Expert Advisor you want to test and click "Expert Properties" to set your desired parameters. In the "Testing" tab enter initial deposit amount, choose
currency and make sure "Long & Short" positions are selected to allow both, BUY and SELL operations.
Set your desired EA inputs
Most of the Expert Advisors have at least few parameters you can set. In the "Inputs" tab you can set them the way
you want for this particular test.
Select instrument, time frame and modelling
type
Next step is to select currency pair (Symbol) and its time frame. Then you need to select "Every Tick" as your
modelling type.
It has no e〰〼ect if you change the spread here as Tick Data Suite will override this setting and use real variable spread
which actually happened in the past. In this example "Current" is selected and that's what will show up on the
report.
Set the date range
Strategy Tester allows you to select date range for the test. If it's not selected, like in this example, backtest will be
performed on all available history price data.
But if you need to test the strategy only during speci艗c date range you can easily do that.
When you done setting parameters click "Start" to begin the test. It might take a while depending on how long the date range is, EA algorithm and your computer power.
Backtest 艗nished. Here are the results
After backtest is 艗nished you can see the results. In this equity chart we see modelling type and quality is printed,
which was "Every Tick" with 99% quality.
Report of the backtest
In the "Report" section you can see more results of the backtest including the modelling quality number as well. Additionally you can 艗nd full trade list generated during the
test in the "Results" tab, 艗nd if there were any errors (Journal) or restart the test again in the "Settings" tab.
