9/23★Sometimes I borrow the power of ChatGPT. Its 163【What is backtesting? The indicator to look at first when choosing an EA】
FX Auto Trading, the EA developer Reiwa’s Double-I.
This series, written with the aim of posting every day since last year.
It has probably continued for about a year and a half now!
If you read what has been written so far,
I believe you will approach a better EA operation.
And, since I’d like to take a short break,
I plan to continue posting with the help of ChatGPT.
Occasionally, I will post irregularly as before.
What is Backtesting? The indicators to look at first when choosing an EA
When choosing an EA (automatic trading software), backtesting is the first thing you should focus on.
So, what exactly is backtesting, and why is it important? I will explain.
What is Backtesting?
Backtesting means testing an EA’s performance using historical price data.
“Back = past” “Test = verification”
In other words, applying the EA to past market conditions and simulating the results.
A proper EA developer will always verify whether the logic has an edge through this process.
Long-term historical data is used for this.
That data includes not only yen strength and weakness, but also events like Lehman Brothers’ collapse, BOJ and Fed interventions, remarks by key figures, and major economic indicators—essentially all market environments.
And only EA that could produce an upward-sloping equity curve over that long period is showcased.
This is the basic stance of a traditional EA developer.
The Importance of Backtesting
The future market will not necessarily be the same as the past.
However, one thing I can state with confidence is:
“EA that cannot win in long-term backtests will not win in the future either.”
Because without a basis of historical data confirming an edge, there is no grounds to expect success in uncertain future markets.
If you choose an EA without basing on backtests, thinking “it seems like it might win” or “recent performance looks good,” the grounds are extremely weak.
In that case, the risk of failing to sustain long-term operation is very high.
Summary: If you choose an EA, always check the backtest
When selecting an EA, the crucial question is how to view the backtest.
Has the verification period been long enough?
Does it include major market swings?
Is the equity curve steadily upward-sloping?
Thoroughly confirming these aspects allows you to identify an EA you can safely operate over the long term.
Backtesting is, after all, a test of the past, but it is an important first step toward predicting the EA’s future.
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【From “I want to start with EAs!” to intermediate level—flow summary】
First, it is crucial to master installing EAs.
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MT4 EA (Expert Advisor) and Indicator installation procedure
https://www.gogojungle.co.jp/post/1/8212
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※GoGoJungle video version※
Even at the start, not everything can be understood at once, and some people will stumble. I was the same, so stay calm and you’ll be fine!
If you have questions, there is a contact form, so please use it!
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https://www.gogojungle.co.jp/inquiry
【How to choose an EA】
Now that you’re ready to operate an EA,
you may think, “I can’t tell which EA will win… I don’t want to lose….”
So, Reiwa’s Double-I
has published articles so you can gauge through backtests to some extent.
The following articles were serialized.
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https://www.gogojungle.co.jp/finance/navi/series/1714
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Usually, the backtest period is longer than the forward period,
and whether you win in the forward period can be estimated by mastering backtest evaluation methods.
【How should risk management for EAs be done!?】
And no matter how excellent an EA seems,
FX collapses if risk management is neglected.
Therefore, for EAs, how to manage risk?
is addressed in the following article.
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■ “How to calculate EA risk management”
https://www.gogojungle.co.jp/finance/navi/articles/64703
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【EA operation mindset is also important】
And, to sustain EA operation long-term, an “EA operation mindset” is also important.
Articles on these topics can be found at:
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12/30 Year-end and New Year SP!! Total EA Course Part 3
https://www.gogojungle.co.jp/finance/navi/articles/80551
8/12 [Obon Holiday Special! Your EA Mastery is Here! “Mindset for Improving EA Operation”]
https://www.gogojungle.co.jp/finance/navi/articles/72829
8/17 [Obon Holiday Special! Your EA Mastery! “Notes during EA Operation”]
https://www.gogojungle.co.jp/finance/navi/articles/73797
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That said,
the content is quite substantial and important,
even if you cannot understand it right away, please make sure to read it!
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【Reiwa’s Double-Ie EA Listing】
https://www.gogojungle.co.jp/users/112481/products
Specifically, categorizing Reiwa’s Double-Ie EAs by genre
https://www.gogojungle.co.jp/finance/navi/articles/67162
(Genre diversification is essential when building a portfolio)
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【Reiwa’s Double-Ie serialized articles】
■ EA Beginner’s Course
https://www.gogojungle.co.jp/finance/navi/series/1700
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“About the calculation method of EA risk management”
https://www.gogojungle.co.jp/finance/navi/articles/64703
【Portfolio version】About the calculation method of EA risk management
https://www.gogojungle.co.jp/finance/navi/articles/65978
Tips for distinguishing fraudulent products (in the case of EAs)
https://www.gogojungle.co.jp/finance/navi/articles/64738
First things to check when you have questions about EAs
https://www.gogojungle.co.jp/finance/navi/articles/65619
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https://www.gogojungle.co.jp/finance/navi/series/1714
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https://www.gogojungle.co.jp/finance/navi/series/1701
https://www.gogojungle.co.jp/finance/navi/articles/64723
https://www.gogojungle.co.jp/finance/navi/articles/65010
https://www.gogojungle.co.jp/finance/navi/series/610
【Reiwa’s Double-Ie’s beliefs】
Develop EAs with proper methods,
gain the affection of more people,
and maintain a long-term WIN-WIN relationship,
to revitalize the EA market and raise literacy.
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