Backtesting With Trading Strategy Builder
Dear traders, in this lecture I will show you how backtesting works in EA Studio trading strategy builder compared to MetaTrader. I see already that I have the 1st trade opened with Ethereum and it happened on the opening of the new bar. The trade opened exactly at the round number,
after we had the cross from the Williams’ Percent Range.
So the cross happened during this bar, the previous one.
And then when the new one was open, the cross is confirmed and the trade was opened automatically. The Stop Loss is placed and the Take Profit is somewhere below. Right over here.
I have left some lines from the explanations that I did for this strategy. So you see that the trades opened automatically with the Expert Advisors.
I don’t really need to do anything. And while I’m waiting for more results and from more trades, I will explain to you, how I created these strategies, how I tested them, and how I know what parameters to use at any moment for the different Indicators inside the strategies.
What I use is EA Studio trading strategy builder, and this is a web-based program or software for algorithmic trading, which allows the traders to do many things.
You need no coding skills
Simply, we can generate strategies, after we generate them they go to the Collection, then we can see individually each strategy in the strategy Editor. And here I have the strategy for Ethereum.
So it is the very same strategy. You can see that the long entry or the entry condition is the Williams’ Percent Range crosses the level line upward and then we have the exit condition, which is the DeMarker. Here are the parameters.
The Stop Loss and the Take Profit.
The best thing with trading strategy builders is that with one click, we can export these strategies as Expert Advisors. We don’t need to have any programming skills and we don’t need to code it.
As well, we see immediate backtest or see how the strategy performed during the testing period.
So, for example, if I change any of the values, let’s say I change Period 40 and I click on, accept you will see there was a difference in the balance chart. Let me go back to 38 and I see there is a difference as well. If I change the Stop Loss, let’s say I will change it to 15 instead of 13, there’s a difference. And if I go back to 13 again, I see the difference.
The Indicator chart and the Journal in EA Studio trading strategy builder
So this way I can build strategies and automate them very easily. And in the same time, I see their performance and the Indicator chart, which means that I have a very clear understanding of where the trades were opened and closed.
Something that is much harder with MetaTrader. If I just go manually, as you saw, it is hard to find examples because if I take an example to backtest the strategy over the chart I don’t know if at that moment there was a previous signal.
For example, there are so many entries. And which one is the correct one? If I have entered, is the trade closed? It’s really hard and you should start from the beginning trade after trade. So you can take it as an example. And with the trading strategy builder, it is so easy to see because there is a visual representation of the trades where they opened and where they closed.
For example, I can see there’s a short trade, but the Stop Loss was hit. So that’s a negative trade. We have a positive one. The trade opened and the Take Profit was hit. So it’s because of the Williams’ Percent Range crossing downwards. And the Indicator chart is very useful to understand exactly how the strategy works. As well, we have the journal where we see all trades that opened and closed.
The balance chart in the trading strategy builder
We have the balance chart where we see exactly the equity line and some more statistics as drawdown in currency in percentage, long balance, short balance and so on.
Now, let me go back to the editor. I will import an Expert Advisor back.
Let me take any of the Bitcoin strategies, and I click on Open.
And below is, for example, the Candle Color strategy. If I click on it, you will see that I have the minimum body height, consecutive candles.
So let’s change it to 3 and see what’s the difference. Instead of 4 consecutive candles, let’s say that we want to open the trade after 3 consecutive candles. And you see what a difference we have in the balance chart.
And if I increase it to 5, I click on accept. Oh, still good strategy. It does 17 920.
Let me just go back to 4 and I click on accept, 23 630, and this is with starting balance of 10 000. So obviously in this case 4 works best and, you see how quickly I can do that test and there are a lot of tests that are available with the trading strategy builder, for example, the Monte Carlo, which is a great robust tool.
Make use of the 15 days free trial for the trading strategy builder EA Studio
So if I perform one, I can see if the strategy is profitable with randomize Indicator parameters or with different backtest starting bar, which is important. Or in simple words, this is how the strategy would perform if we started at a different moment or a different date.
And that’s an important test because obviously I just started trading with this Expert Advisor in the account. I traded it previously on another account. You will be trading it at a future moment. So this test just proves that the strategy is still profitable no matter when we start using it. And there are plenty of similar tests on the trading strategy builder. They’re not going to explain right now on the home page.
There is a free course if you want to learn more about the trading strategy builder. And there is actually 15 days free trial, which you can use if you want to create your own strategies or just start from scratch. If you go to a new strategy and start adding different Indicators, for example, the MACD and I click on accept you will see that it shows the balance line, which obviously is losing just 1 Indicator that I picked randomly.
You can export your strategy as an Expert Advisor
Then I can add any Indicator as an exit. There is already a more decent balance chart which is still losing. This is how you can build your strategy. If you like it, you can export it as an Expert Advisor for MetaTrader4 or for MetaTrader5. And depending on which platform you are using, MT4 or MT5, you have the ready Expert Advisor with the code, everything inside. One click export.
So this is really the revolutionary thing in algorithmic trading in the last decade that we have these trading strategy builders. And it’s so much easier for me as a trader because before I used to hire developers to code the strategies for me and it was very expensive. These guys charge like $30 to $40 per hour and it takes them many hours to code such a strategy. And there are mistakes.
So I had to test these strategies, then give them back to them and they fix it and send it back. You can imagine this is just 1 version of the strategy. If I have to change anything, I send it again to the developer to add another rule, for example, another Indicator. And it was so exhausting and so expensive to do that. And honestly, with not very good results. But with the trading strategy builder, we can easily build strategies that are profitable for the testing period.
Find the new parameters attached to each of the lectures
So for example, I am testing it since 2017 until the month. 3 years is more than enough for me. Some people prefer to test for 5 or even 10 years and the market was so different 2-3 years ago, even 5, especially for the Bitcoin. As you know, it was totally different in 2017, 2018, 2019. So you don’t really need to test that so far away, back in time when the market was different. You need to make sure that the strategies work recently for the recent market conditions.
And this is one more time my job if I open any other of the strategy. So this is the EnDe Expert Advisor, as I call it, because it uses the Envelopes and the DeMarker. I have a very stable, balanced chart which shows that the strategy is actually profiting recently. I do my best to observe the strategies to follow their performance. And if I have to change any of the parameters, I do it.
I changed the parameters of the strategies which you can find one more time attached to each of the lectures. There, you will see what parameters I use for these 5 strategies all the time. And this way you will know that you have strategies that are working for the current market conditions. So this is the trading strategy builder EA Studio that I’ve been using.
The EA Studio strategy builder
It’s available not only on our website at EA Forex Academy but on many other websites. It’s professional software that we have on our website at the EA Forex Academy. You can find it right over here.
It’s integrated on the website. And as I’ve said, you can test it out with the free trial if you want.
And there is a free course and a free Start-Up Guide, which will help you learn all the features that are inside the trading strategy builder.
In the next lecture, I will show you how you can do a backtest on the MetaTrader for the strategies, which is very recommendable to do before actual trading with the strategies for your broker.
Thanks for reading. I will see you right in the next lecture.