MetaTrader Strategy Tester is a free tool. It is user-friendly and has a convenient GUI. It is handy if you need to quickly evaluate an Expert Advisor. But it is not well suited for intensive testing.
We have started our testing efforts with this tool. However, quite soon we decided to develop our own Forex strategy testing software.
Below we share our reasons to spend time on our development.
Interpolated Quotes Are NOT Real Forex Market!
The most principal limitation of the MetaTrader Stratefy Tester is the quality of the tick level quotes. To get tick data, MetaTrader Strategy Tester takes corresponding M1 bar and interpolates this data. Which makes it artificially “smooth”. However, anyone having real Forex trading experience knows well that wild swings (a.k.a. “whipsawing”) might occur within seconds. Most often this happens after major news releases or due to some unexpected events. However, the interpolation algorithm doesn’t generate them.
Why is this important? The problem is, that in quite many cases Automated Trading Strategies show far better results in the MetaTrader Strategy Tester than they would have on the real Forex Market. Especially drastic differences can happen in the real-time behavior. But smoothening (and thus lagging) indicators might work in the Tester almost identically to the real market.
This problem is not only relevant for day trading. Regardless of the timeframe the trading strategy uses, entering and exiting market has to be always done in real-time. Which can influence placing orders. For example, whipsawing can trigger too tight stop-losses many times before the market confirms its new direction.
Next, the MetaTrater Strategy Tester is too slow. This is because it runs tests principally only in the graphic mode. To put it in a more correct way, it is fast enough for manual testing only. So, if you are testing one strategy for one currency pair and on one time interval, you will most probably be OK. But the task is to evaluate multiple strategies with several configuration options in each, using many time intervals as test scenarios – some other software needs to be used that supports batch execution.
How To Test With Metatrader Strategy Tester?
This might sound like a stupid question. But the answer is not that obvious.
We can load our Expert Advisor in the tester and run in for some currency pair on some time interval and get a test report. What next? How can we make a decision about the quality of the tested strategy? Quality evaluation is what testing is all about.
In other words, even if one test run is profitable, it is not enough to decide that the trading strategy is ready for real trading. Metatrader strategy tester is only a software tool. And it doesn’t provide any guidance how to make decisions. To do that, we need testing method.
There is considerable debate over the accuracy of MetaTrader’s strategy tester. At best, backtesting offers only a close approximation of how trades would be executed in real-time. But it’s the only tool available to rapidly test any strategy over a wide range of trading situations, and one that you should learn how to use well.
Do you have any suggestions to articles, courses, books, etc. that would help you how to use MT4 ST?
Stephen:
Our answer is no. We don’t use it. Though we started our testing with Metatrader 4 Strategy Tester. But very soon we decided to spend time developing our own software because we were not satisfied with Metartader ST. The main problem in our opinion is that Metatrader interpolates tick quotes. It takes a M1 bar data and generates ticks from it. This makes them too “smooth”, which is not what you see in real trading. Our approach to testing was to use only REAL market data. See more here: http://www.forexstrategytester.com/metatrader-strategy-tester/