How I BACKTEST Using MT4 and Soft4FX

how to back test using mt4 probably one of the biggest questions that i get on youtube now especially with the content i was creating in q4 the things i was mentioning regarding mt4 so i really wanted to show you a clear video a clear walkthrough today of exactly what to do what not to do things to think about guidance points things that i think about how i collect data and everything else in between so it's gonna be really good cannot wait for this video so without further ado let's get into it right now so diving into the platform now so we're starting off on mt4 now i do get quite a few questions about this because normally you can't run mt4 on an apple device such as a mac or a macbook pro so in order to get around that problem what i had to do is download number one windows because you can't run mt4 without windows as far as i know anyway and then i had to download parallels so parallels is a windows based platform that allows you to essentially run md4 you know on on the device that you want to without having any trouble so i had to download parallels followed by windows 10 and then i could actually run mt4 on those platforms and that's where you can see i've got windows down here i can now allow to you know minimize it and go back from the windows back to the mac back to the windows so just makes everything smooth and just an easy process to use so i do recommend that if you are looking to backtest using md4 now i would normally use tradingview to backtest i love trading people for backtesting and to be completely honest i much prefer it i would prefer prefer the whole layout to mt4 however due to the fact that i couldn't when i started to backtest the lower timeframe stuff so i'm talking so one hour so 15 minute there was only a certain amount of data that i could actually access on trading view so i think that's something that they may work on in the future i'm not too sure however right now i had to you know dig into other platforms and use mt4 because without that i wouldn't be able to back test you know so before let's say 2018 2019 so i had to use this platform to be able to go back to that data to essentially test my strategy over the course of three four five years of data just to prove to myself that it does work and you know a lot of you are going to be familiar with that process so this platform right now that i'm using is called soft4fx now i highly recommend this i'm of course not affiliated with any of these guys or this company or this person or whatever but i just got recommended it by a word of mouth by a friend started using it myself and i was like yeah this is this is definitely a great platform definitely the one the best i've come across so far um to actually back test and run a back testing simulator through mt4 so highly recommend it you can download a free trial i do prefer the paid version just because on the free trial you only get four trays to take i believe before your time limit your essentially trade limit runs out and you have to start over again but it's literally like 99 or 99 pounds i believe so it's not too expensive considering if you get you know your essentials for a strategy made through this then you've got to think about the risk reward of that comparison so just something to think about but let's dive into this so i'm not going to talk you through how to set up this soft4fx the reason being is because it tells you exactly how to set it up on the website and it is a little bit fiddly so once you get it set up you'll come to this platform and once you actually install everything restart the mac if you need to and then once you've done that you'll come to this this platform here once you've logged into the forex simulator so once we've got everything solid all we need to do is go down to data center so we click on data center we can see that we have all the different pairs from euro dollar all the way down to some of the more exotic and minor pairs and we also have some commodities like gold and silver some oil we have some equities and things like that as well so we've got a lot of different variation you know you sh you know you may need others beside this but a lot of you are going to be covered with these currency pairs which is perfect so as you can see i've literally downloaded data for three pairs so you're a dollar pound yen and pound dollar so i'm just going to clear these because i don't need these right now oh let's keep these actually because i will need one of them so all you need to do is make sure you've got enough space on your mac of course but then you just download the data so let's say i wanted to download aussie dollar data and i wanted to download the last three years of data all you then do is just download that so it's going to take a little bit of while you know probably it's going to be done in 10-15 minutes depending on your speed but once you've done that you can have data for that pair and you're gonna be able to access those two three four five six plus years you can go back as far as you like of course i don't think it's relevant any any past five years to be honest but it's entirely up to you but once you've done that you can then go on the data and actually access the data whether that's on the weekly chart whether that's on the daily chart whether that's some two minute timeframes or one minute time frame um you can actually access that data which is super super helpful in my opinion so we've got that so we can close that now and let's start up a new simulation so we can just choose the selected pairs that we have downloaded so far so for this equation i'm just going to use eurodollar now once again this is talked about on the video on the website i believe but the provider that i use is dukascopy just because this is the most accurate data i've found so far to the light markets that would have been present at the time so that's what i use but of course like anything that is personal preference and then we come to the main settings so we can start the simulator you choose the exact data you want to start from so let's say i wanted to start from january 1st of jan 2019 account currency usd you can put in the exact amount so let's say this is also good as well to picture what exact amount you want to be using so for example if you have a 20k account you can of course put 20k in there but if you you know you're looking to get funded in the future or you're looking to trade a high amount you can also play around with those amounts let's say you want to trade 100k account we can put that in there just for metrics select the chat time in the charts in my case because i'm uk i wanted to use gmt then if you wanted to end the simulation on a certain date you can do so as well so let's say we wanted to end this on let's say we want to do a back testing period from january to march 2019 we can end that on the 31st of march 2019 and then it's going to cut off there so you won't be able to back test any further than that leverage 100 to 1 but of course you can choose it as you can see max here we've got a thousand you shouldn't be needing any more than that anyway in my opinion spread now this is where you can do fixed spread or real variable now of course in the live markets during different time zones what this is going to allow you to do is actually get the accurate data that it would have been at the time so for example if you've got a one pip spread or two sprint up to pip spread on your dollar at that certain time it's gonna allow you to actually use it in the moment as it would have been back then which is super super helpful i've never actually seen that before on any of the platforms which is very helpful if you wanted to do a commission as well you can add that now initial data on the chat so if you wanted to go back 15 days then you can i usually use like 90 just so that if you want to scroll back on the charts and zoom out you've got that available data um to actually go back so i'll show you what i mean in a minute as well once we've done that we can just start the simulation so we can start the simulation i literally i'm on my mac right now but i can just drag it into my corner the bigger the screen the better in my opinion and what you need to do from then on is we can go on charts and then here's where we need to add the time frame so we can see we've got you know different custom time frames that you need let's say you wanted to back test the one-hour timeframe it's going to be standard for a lot of people we can use standard charts there's even seconds chart i haven't dug into that myself because i don't need it at this point in time but we have got standard chart or anything else too and then yeah pretty much good to go it's gone one hour perfect also if you wanted to add multiple time frames you can actually add another one so let's say you wanted to backtest multi-timeframe analysis which is a little bit tricky i'm not going to lie but you can definitely do it i had to do it in q420 2020. so let's say you wanted to add two time frames you can then open this one that's going to come up and then you can open up a second one as well so that's no problem we can close that so now we are good to go so once you've got your charts up and running that's when we can customize the the actual layout of the charts if you choose to of course you can keep it like this or the standard chart but it depends how you want to trade i don't personally like this kind of chart wouldn't be able to see too much so you can see the outline of charts but if you want to see the specific candles i find it helps to actually design your own layout so what we then need to do is go in charts go on properties and then you can customize how how exactly you like it have a play around with it if you're new to mt4 it takes a little bit of experimenting just to figure things out but you'll get it and i've already got my template so i'm going to go on the template that i set up so let's go to this dark navy chart perfect so this attack this is the one that got set up so it's navy bars with a navy background plus white downwards poses bars as well so we got this and this is a 15 minute time frame we can do the same for the 1r2 let's go back charts template load template okay sorted so we are good to go with that and now we're moving on to the next stage so once you've got your template set up once you've got everything sorted this is when we can get into actually back testing yourself so i do recommend having a spreadsheet to track the data otherwise you know you can just use back testing for simply just getting your eyes used to seeing certain moves getting the subconscious part of your mind involved and just seeing these moves play out over and over and over again to give you confidence in the strategy that you trade but i do just recommend having that you know data to actually come back to a future date if you want to so that you can actually prove to yourself that a strategy or style or you know it actually works for yourself so for example if you've got two three four or five years of data on a spreadsheet um then you can actually go back to that and be like cool well you know i've take for example the reason why this is helpful is because if you take you know two wins followed by three losses in the light market with that same strategy if you didn't have that data you may be questioning yourself after that third loss you may actually hesitate on that fourth position and that fourth position could indeed be a winner a winning trade right but if you go back to your data and be like okay well you know my max drawdown percentage is usually from five years of data four losses in a row so technically i shouldn't have more than four losses in a row sticking to this pair sticking to my strategy if i have done everything right according to the plan and the strategy that i've set up so that is why it's helpful so i do recommend having a spreadsheet i don't have one for you guys just yet but i will of course do one in the future for you the one that i was using is a third party so i don't want to you know give that to you because it's just not my place to give but in the future when i create my own and customize my own i will i will be sharing that with you for sure so let's get into it so as you can see the date down here is the 31st so what it's going to do is take you back a day before the time frame that you selected and then all we need to do is this is the focused this is what we need to focus on here so this is the speed so this is the parameter that we can um access the speed so for example i show you so if we wanted to do 29 ticks per second if we play that you can see on the screen price is starting to move a little bit this is the one-hour chart so it's moving very fast on the lower time frames if you want to speed that up even more then of course you increase this and it can go pretty rapid once you start speeding things up so let's pause that for now and if you just wanted to select one by a time you can just literally select one bar as it is like this now i you can access previous bar like you can rewind it but there's also a setting on the main custom settings that doesn't allow you to do that so essentially you can't cheat with it which is how i usually like to do it too i just forgot to put it on this in this point of view but it is helpful so let's say that you're trading a strategy let's go simple for you know if you're a newbie or you're trading new in the markets you may be looking at double top patterns you may be looking at double bottom patterns you may be looking at anything so let's uh let's put on a few things that a standard trader will be looking at so let's put on let's have a look uh where's the ema cool so let's put a 50 in my own as well just add let's put a double top let's put a few different couple things on there as well let's just scroll out so as we can see we've got this support zone here this support zone here i don't use spot resistance myself not in this way anyway um so let's just use this we've got a double top here then we've got this double top here so let's say you're trading double tops right and you're looking to take a trade as price gets to here so i probably people gonna be waiting for a direction first so let's play this out let's start to actually see what actually happens so we get a push up there's double top area price breaks above this area here so if anything that's just adding more confidence to the trade hello siri starting to get involved in the video anyway it's not the first time that's happened um throw me off with that anyway what we need to do is let's say we want to take a trade here right so all we basically do is if you want to take a live trade then you just take it at market so we can say risk one percent let's go with 0.5 for this example and stop loss in pips or price let's say we want to go with what's this the one i chart let's say we want to do a 20 pip stop and then if you wanted to take profit you could do that as well let's say i don't know let's say 40 pips right so if you want to sell that market you can do or if you want to press a pending order and you're wanted to have price above here or below here if you wanted to buy then of course you could do that as well which i tend to use but let's say you wanted to sell here you would sell that here you can see you can see the market execution exactly how it would be in the light markets stop above the high take profit is down at this previous um low high uh higher low which is perfect and then let's see how this plays out okay funnily enough actually to take profit but you know that could have been a loss but regardless of what it whatever it does it would have been ideal if i'd have set the take profit down here to be fair um yeah let's remove the take profit if we can so if you want to check the trades you can go on trades and then you can monitor the trades and details so you can access profit loss any commission stop loss take profit let's get rid of the take profit for now and then if you let's say you know this starts to play out in your favor which it does perfect let's say you want to close part of the trade you can then do that so exactly how you would on mt4 if you wanted to close partials perfect sound so now we bank some profit which we can see on here which is perfect so we've closed a profit loss of 786 which is perfect so we got that there and then we've left the rest of the trade running so you could essentially close 50 of your position or 25 or 75 depending on your style but of course most people won't be doing that i would think so if you even if you wanted to keep it open you could just literally let that run as it is so prices dropped which is perfect and you just literally monitor that how it is so let's say you had a take profit at this level here let's just rewind this let's put a take profit in let's try and drag this down cool so now take profit set is there you can track positions here and now all you need to do is literally you know let let trade play out this one hit that profit which is perfect and or either would do the only problem with back testing on mt4 is i've found with screenshots so you know how you'd normally add a you know let's go on to this you know how you'd normally add a before and after screenshot into here so usually how i would have a section on before and after screenshots and then literally put it in from there the only problem with mt4 is you don't have a link to actually a screenshot like you do with trading view so what i would usually do is literally press command shift and five on the mac and then you can highlight your area that you want to screenshot so let's say it's just here so you can do before after screenshot capture that it's going to save it on your desktop and then you can literally go back to that save it like google drive or whatever you wish and that allows you to actually see the trace playing out i've just found that super super helpful and that's what i've added into my winning trades document that i go over quite regularly too so just a quick tip there as well a quick tip as well with this back testing is to be as accurate and as honest as you possibly can you know we've all been there in the past when you first start trading and you think you know i've actually cracked this trading thing it's pretty easy like that that tree that i've just taken there is pretty much look at you know just putting on random support resistance levels that happen to play out could have been lost whatever it is but just be as honest as you possibly can with the trades you know if the trades are lost don't be going back and forth and back and forth and be like now i wouldn't actually take that be as honest as you possibly can so if you took the trade take the trade collect the data because a quick tip that i found in last year as well it's better that you take you know let's say you took 20 losses and 20 wins throughout the course of a year it's better to have that fundamental raw data because you can work with it you can make tweaks with it you can refine it you could add filters to it to improve it but if you start skipping things and start cheating yourself and start thinking you know uh that trade was a loss i'm not gonna put that in or i didn't i wouldn't have actually taken that then it's gonna start messing you up because you're not gonna have that raw data to then go back and you can't be fully honest with yourself and then if you start taking more losses in the live markets you know you can fundamentally come back to the core reason behind that and that's not actually it's being accurate you know you wasn't accurate when you were testing so therefore it's just showing itself as a live representation in the live markets of that lack of work that you've put in so just something to bear in mind so yeah that's a quick tip that i'll give you but just bear in mind this back testing can be a very very good tool to use to collect the data to build confidence to increase your strike rate to increase your profit and loss to just make improvements and see what's happening live in the markets and as you can see on this from you know as close as you're going to get in my opinion without forward testing without actually being the light markets to light markets because you have the trades you have the profit loss you have everything there for you as we can see from the screen that we just brought then of course we have the history you can see everything we can see closed trade by partial opened close by take profit we can see everything we need to and it gives you that live representation of okay well i actually would have banked that in the live markets how should i have that same amount of capital so it just gives you that confidence to trade it in live markets which helped me a lot with the stuff i was developing last year so just a quick tip but like i said before don't cheat yourself play it exactly how you would in live markets or as close as you can as possible and that's going to give you a great foundation into actually live trading in the markets also what i'm going to show you as well is the stuff that i track within mind so once again i'll do an entirely different video on this in the future once i've got a spreadsheet set up for you guys um then i will do a separate video and talk you through that and share that with you but just if you want to create your own or you've got your own some of the things that i do tend to track is obviously you've got trade number you've got pair you've got the date you've got the month day time date closed then we've got duration year direction trade setup so it's just my own style something i named it don't pay too much attention to that session was london open because it was this was my sub strategy any notes that i wanted to add was it scaling or not trade quality you know you've got risk stop loss risk per pip this is all calculated um and then the result of course so you can see don't worry about taking losses the reason being look at how many losses i take here like overall it's got a good strike it was a striker here strike rate was uh 56 so it's not bad it could be improved for sure i've definitely seen things that are you know higher strike rate than this but the main thing that i focus on is the equity of like how consistent is that equity to give over a long duration of trades and then you add that to this this is just one year of data you then start compounding that to two three four five years of data and you start to see how that equity curve plays out it gives you so much confidence in the live market so i cannot get that across enough to focus on that but just to give you a live representation of what i was talking about before if you didn't have this data right and you're sat here let's say you start trading a certain style because this has happened to me before it's happened to probably everyone let's say you take the first trade your first trade is here right then you take a number trade and then another trade before you know it you're you're three percent down or minus 1.5 or how how much you ever you risk your three losses down regardless so if you just focus on that data you're going to be doubting your strategy three trades in but not knowing that okay well this is why trading is such a mind game you can miss out on that one because it has hesitation and actually you know not being sure about the style and then what happens next you then go ah okay you know it's just probabilities next road loss and then next trade you hesitate and before you know it you're messing with the edge you're messing with the probabilities you're messing with the style so once you've got this raw data the best thing as long as you've proved it to yourself and as long as you can stick to your plan is to literally take every single trade that fits with your style because if you start messing with the numbers and start taking this out and this out and this out and this out you know you're messing with the numbers and then that fundamentally comes back to messing with the equity of messing with these numbers messing with this compound in return messing with these balances that are going to be present at the end of the year obviously there's there's a completely different thing between back tests and light markets light markets this is a completely different ball game altogether however back testing in this way is just going to give you a good start to actually um you know getting them as close as possible that you can so hopefully this video is going to be helpful i don't think there's anything else to go over um i would just literally like i said focus on tracking the data focus on getting the spreadsheets because then you can go back to it like we've talked about here and you can see okay this is where i would have taken the trade you know you can add notes to it add comments to it on google drive or write it up or whatever you want to do but you can see it without seeing that in hindsight it's not going to offer you the same value so just something to bear in mind as well but overall hope this video has been helpful and hopefully it's actually giving you a guide into actually trading this trading through this platform uh if you've got any questions about anything that i've you know maybe missed out or not covered drop that down below in the comments and i'll be sure to get back to you very very soon [Music] [Applause] [Music] [Applause]

Channel: Michael Bamber

Views: 23,919

Keywords: How to BACKTEST a Forex Trading Strategy Using MT4 in 2021, How to BACKTEST a Forex Trading Strategy Using MT4, How to BACKTEST a Forex Trading Strategy, how to backtest a forex trading strategy in 2020, backtest with me, michael bamber, michael bamber backtesting, backtesting, forex, forex trading, forex trading strategy, forex trading strategies, forex trading for beginners, forex strategy, forex trader, day trading

Id: DSq0tLy6vUw

Length: 24min 28sec (1468 seconds)

Published: Thu Mar 11 2021