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There are hundreds and thousands of MT4 expert advisors on the internet, which one works best in today's market?
Instead of relying on outdated comments on public forums, or expired review sites, backtesting the robot performance and functionality on your own MT4 is the best way to get your answer. This article shares how we backtest large numbers of EAs, in the fastest way possible, to sieve out the gems from the lemons and rotten tomatoes.
Start with a brand new MT4 demo application
If you test forex robots frequently on your MT4 strategy tester, you will notice all the robot names in the drop down menu of your strategy tester. These names remain on the drop down menu even after you delete the EA files from your "experts" folder. And there is a limit to how many EA names the drop down menu can hold. To prevent an over clogging of EA files in the drop down menu, it is advisable to start with a brand new demo MT4 application.
The other reason why you would want a new MT4 application is to focus on the robots you are testing at hand. If not, you will have the new robots mixed in with the old robots in the drop down menu, which will slow you down when you are searching for the robot to test. Nearly every broker should offer an MT4 demo account. Click here for an MT4 demo account.
Generate sufficient MT4 historical data
While backtests are limited by historical data, they are much faster compared to forward testing; so backtesting is still the quick and easy way to test EA viability. After installing the MT4 application and creating a demo account, we want to ensure we get the historical data. There are a number of ways to do this for free:
- Go to Tools > History Centre > select the pairs you are interested in. Most expert advisors trade the major pairs such as EURUSD, GBPUSD, USDCHF. There are also a handful which trade "non ranging" pairs such as EURCHF and EURGBP. So it will be helpful at this point to double click on all the time frames as seen below, or click download.
- You can also select the timeframe and pair on your MT4, and manually scroll backwards on your selected MT4 chart and this does generate historical data as well.
Get your files organized
With your MT4 good to go, we want to transfer all our EA files into the respective folder of the newly installed MT4. Simply match the files to the folders to which they belong:
- Place expert advisors (.ex4 or .mq4) in MT4 EXPERT folder
- Place indicator files (.ex4 or .mq4) in your MT4 folder's EXPERTS > INDICATORS folder
- Place .dll files in your MT4 folder's EXPERTS > LIBRARIES folder
- Place .set files in your MT4 folder's EXPERTS > PRESETS folder
Let the fun begin
Restart you MT4, click into VIEW > STRATEGY TESTER. The list of EAs you are testing should all display in the drop down menu.
Accompanying each expert advisor is usually an instruction manual, be it in on a notepad, a word document, a pdf or on the provider's website. Open this and zoom in on 2 key information:
- The pairs which the robot runs on
- The time frame on which it runs
Now select the respective robot on MT4"s strategy tester, and load the currency chart and time frame as per the instruction manual's recommendation. If you cannot find this information, just try EURUSD H1 and EURUSD M5, or GBPUSD H1 and GBPUSD M5 since these are the most common charts for robots.
Next, turn off visual mode and start the backtest. By turning off visual mode, you get the trading results faster.
Key Observations
Right after you start the backtest, click into the "Journal" tab; you want to make sure your EA was "loaded successfully", and lookout for any errors in the software. If all goes well, there should be trades executed within minutes.
Next, click "Graph" to observe how the robot is performing on backtest. If the chart is an outright downward slope, you probably would not be too keen on letting it manage your capital. On the flipside, you also want to be wary if the slope is up all the way on every trade. A healthy balance of wins and losses, with a graph that is either flat or sloping up should be of interest. Take note of the names of these robots.
Going Deeper
By now, you would probably have narrowed down the large pool of EAs into just a handful. These deserve greater attention. For each of these:
- Browse through the instruction manual again to understand any trade logic that might be explained, you may want to tweak some of the default settings at this point.
- Run the backtest again, this time with visual mode turned on to visualise sound trading logic. You can run this on more pairs to observe any differences in behavior as well.
- Eliminate any robots which you think are not trading on sound strategy and logic, or perhaps do not trade enough, eg. 1 trade in the whole year.
Let's Get Real
Without going into the .mq4 source code and digging into programming language, the easiest way to continue studying the selected robots will be the forward test. If there is any robot that was programmed wrongly but somehow worked on the backtest, these would be revealed under real market conditions and execution.
Open the MT4, open the recommended charts and load the selected expert advisors to trade. This will be your forward test, which you can run for as long as you like to observe how the robots are trading. While the robots are forward tested, you can get on with your life and perform other tasks, checking periodically on the performance of the robots.
If you have more time
This is how we test a whole bunch of expert advisors quickly; we may have missed out on some gems of course. If time is on your side, you may choose to revisit the other robots, reading their individual manuals or studying their .mq4 codes, then see if the rest work for you!
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