Stocks & Commodities V. 25:9 (16-18): Forex Focus by Patrick Nouvion
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Forex Focus by Patrick Nouvion
Backtesting And Forex
Does backtesting produce valid results for foreign exchange trading? Here’s a study that answers this question.
For many years, backtesting and simulations have been banished from my toolbox. I only use these tools as debuggers and I never look at the results. I have told people that backtesting is useless without actual historical tick data, and only a dreamer would believe all these simulation reports. I just got my hands on historical tick data from my broker, so I thought I would do some testing. I decided to check to see if I was wrong in steering people clear of backtesting and overoptimized systems. Or was I right in assuming that without historical tick data, simulations were a waste of time?
The first thing I did was choose a system to test. The moving average convergence/divergence (MACD) sample that comes by default with MetaTrader is available for free and everyone who uses MetaTrader has access to it. Using the default settings on the MACD sample, I ran a simulation on a oneminute chart of EUR/USD from January 1, 2002, to April 1, 2007, using every tick option (Figure 1). The results are displayed in Figure 2.
Backtesting And Forex
Does backtesting produce valid results for foreign exchange trading? Here’s a study that answers this question.
For many years, backtesting and simulations have been banished from my toolbox. I only use these tools as debuggers and I never look at the results. I have told people that backtesting is useless without actual historical tick data, and only a dreamer would believe all these simulation reports. I just got my hands on historical tick data from my broker, so I thought I would do some testing. I decided to check to see if I was wrong in steering people clear of backtesting and overoptimized systems. Or was I right in assuming that without historical tick data, simulations were a waste of time?
The first thing I did was choose a system to test. The moving average convergence/divergence (MACD) sample that comes by default with MetaTrader is available for free and everyone who uses MetaTrader has access to it. Using the default settings on the MACD sample, I ran a simulation on a oneminute chart of EUR/USD from January 1, 2002, to April 1, 2007, using every tick option (Figure 1). The results are displayed in Figure 2.
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