easy going forex system.......need help backtesting

[JASONHANDA]

Hi all

Hope you are having plenty of success in your trading.

I am a newbie to trading and would like to share my system with you and hopefully get lots of feedback. Basically I tested this on paper using Metatrader as I am not proficient enough to code Metatrader to back test automatically, so if anyone can help with that I would greatly appreciate it.

The system is very simple, which I think for a newbie is a good option. There are a few issues with the system such as drawdown and timescale as you will see, but having said that the profits can be quite good and you do not have to sit at the PC all day long.

The system is basically using 4 hour charts with 10ema and 40ema crossover with Parabolic SAR (0.02, 0.2).

1) Wait for fast MA to cross slow MA
2) Wait for PSAR to touch or crossover the slowMA from below for a buy or above for a sell (hope thats clear)
3) If the fast MA is less than 100pips (still experimenting with this) away from the slow MA you have a trade signal

(see attached image)

I use a stop loss of between 50 and 100 depending on the volatility of the currency pair. I start moving my trailing stop up as the profit goes over a 100. But like any kind of trading I use my own judgement too. The nice thing is you do not need to watch the trades all day long. You can just put them in and leave them if you like, using a stop loss of 50 and a take profit of 100-150 and check every 4 hours if there are any new trades.

Manual backtesting has produced the following results (from January 2004 up to and including July 2004). Unfortunately due to personal circumstances I was unable to continue testing and would ideally like to complete the study using Metatrader. Also as this was manual backtesting there maybe some errors:

GBPUSD
======
4 trades
4 winners
0 losers

Total pips: 1416


AUDUSD
======
7 traders
5 winners
2 losers

Total pips: 852

EURUSD
======
8 trades
6 winners
2 losers

Total pips: 674

USDJPY
======
10 trades
6 winners
4 losers

Total pips: 1145

USDCAD
======
10 trades
6 winners
4 losers

Total pips: 747

GBPCHF (needs more testing)
======
6 trades
3 winners
3 losers

Total pips: 3199

EURGBP
======
11 trades
2 winners
9 losers

Total pips: -224


Total trades: 56 trades
Total Winners: 32 winners
Total losers: 24 losers

Total pips: 7809

As you can see there are not that many trades in the year which I think is quite good as it means you can do other things instead of having to sit at the PC all day long. This is a longer term trading system.

Any comments, suggestions or queries are welcome.

Thanks for reading and apologies for the really long post.

 

[Pie Trader]

I don't know how to code an EA for MT4, but there's a great EA called VHands which allows you to replay market action! Basically, you download the data for the pair, in the timeframe you want, and then control the speed of action. You can pause the data and put indicators on the chart as usual.

I've only been playing with it for a few weeks, but to download it and find out all the info you need, follow this link:

VHands Trading Simulator

Have fun!

 

[Market Wizard]

Thanks Pie Trader for the link.

One very useful tool . Amazing what theses programmers can do.

 

[_coda]

Hi Jason

Hi all
...I tested this on paper using Metatrader

MT's backtesting is broken and test results are often invalid as a result. It can skip data which is in the data set. If a trade was active before it decided to skip a couple of months your 50 pip stop could trigger a couple of hundred pips off.

When I searched for information on this I discovered that I'm not the first person to encounter problems in this area with MT.

It's a pity, it would be a nice tool for simple strategies - if it worked.

 

[tr2w]

Your manual testing result is great. Try forward testing instead of back testing. Back testing is not reliable.

 

[BillyC]

Your manual testing result is great. Try forward testing instead of back testing. Back testing is not reliable.

Hello,

I am new to FOREX so for my knowledge can you explain to me what is the difference between backtesting and forward testing? And an explanation as to why one maybe more/less reliable than the other...... I have my ideas, however just want to confirm.

thankyou

BillyC

p.s. I've been using vHands and it is excellent.

 

[brooks79]

Need to forward test. I can win every time back testing.....

 

[Gumping]

Hi JasonH

Great strat! Thanks for the post.

Alpari is a Metatrader broker, and they will let you trade 5p/pip - if you forward test with cash on this platform, you could only be risking £2.50 with a 50 pip Stop-Loss. The results would do you better than backtesting