9/29★ Sometimes I borrow the power of ChatGPT: Its 169th installment 【How to choose EA: Summary: Assess reliability with backtesting and forward testing】

FX Auto Trading, the EA developer's Reiwa Double-E.

This series has been written aiming for a daily post since last year.

Probably we’ve continued for about a year and a half now!

If you read what I’ve written so far,

I’m confident you’ll come closer to better EA operation.

And, since I’d like to take a short break,

I’ll continue posting by borrowing the power of ChatGPT.

From time to time I’ll post irregularly like before.

A Complete Guide to Choosing EAs: Assessing Reliability through Backtesting and Forward Testing

The most important thing when starting EA operation is, after all, “which EA to choose?”

Unlike discretionary trading, EAs leave objective numbers from historical data and actual performance.

In other words, by looking at the numbers you can judge whether an EA is trustworthy or not.

To do that, you should pay attention to backtesting and forward testing (real forward).

Understanding these two properly and evaluating the EA from both sides leads to long-term stable operation.

Importance of Backtesting

Backtesting means validating the EA with “past market data.”

Even during turmoil like the Lehman Shock or the COVID crash, an EA that shows a long-term upward trajectory is likely to be excellent.

Points to specifically check are as follows:

Long-term data (from before Lehman to the most recent) shows a rising trend

Recovery factor (net profit ÷ maximum drawdown) is at least 10x over 10 years

Spread settings are realistic

Expected profit per trade is sufficient

Is the EA based on opening price movement

If these are cleared, you can at least judge there is value in the EA.

Importance of Real Forward

No matter how excellent the backtest is, the crucial question is whether the results are reproduced in actual market conditions.

What needs to be checked here is real forward testing.

Key points are as follows:

Whether it follows the pattern of the backtest

There is at least a year of live trading history

Don’t swing with short-term results (there will be drawdowns)

Also check Recovery Factor as with backtest

Real forward is evidence that the current market environment is truly applicable.

Choose EA by Backtest + Forward

In conclusion, when choosing an EA,

Verify whether it passed in backtesting (used in the past)

Verify whether it is still usable in forward testing (current applicability)

This two-step approach is most important.

Backtesting is the “map,” forward is the “actual journey.”

Even if the map is drawn correctly, it’s useless if you can’t walk the path.

Only when both data are available can you call it a long-term, reliably trustworthy EA.

Summary

As a summary for choosing EAs:

Backtesting measures the ability to endure all past markets

Real forward measures the ability to reproduce in current markets

Only when both are present can you determine an EA that you can safely use long-term

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【Flow from starting EA to intermediate level summary】

First, it’s important to “master EA installation.”

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MT4 EA (Expert Advisor) and indicator installation steps

https://www.gogojungle.co.jp/post/1/8212

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※GoGoJungle Video Version※

Even at first, not everything can be understood at once, and some may stumble, even a lot.

I also stumbled many times at the beginning, so don’t rush—you’ll be fine!

If you have any questions, there is a “Contact form,” so 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 might think, “I don’t know which winning EA… I don’t want to lose…”

So Reiwa’s Double-E has published the following articles to help with backtesting to some extent.

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https://www.gogojungle.co.jp/finance/navi/series/1714

【How should EA risk management be done?!】

And, no matter how excellent an EA you obtain,

FX collapses if you neglect risk management.

So for EAs how should risk management be done?

This is answered in the following article.

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■ About “How to Calculate EA Risk Management”

https://www.gogojungle.co.jp/finance/navi/articles/64703

【EA Operation Mindset is also Important】

And, for long-term continued EA operation, the mindset of EA operation is also important.

Those articles are as follows,

12/30★ Year-end and New Year SP!! EA Full Guide Part 3

https://www.gogojungle.co.jp/finance/navi/articles/80551

8/12 [Obon Holiday Special] Now you too can become an EA Master! “Mindset for Improving EA Operation”

https://www.gogojungle.co.jp/finance/navi/articles/72829

8/17 [Obon Holiday Special] Now you too can become an EA Master! “Cautions during EA Operation”

https://www.gogojungle.co.jp/finance/navi/articles/73797

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So,

this is quite substantial and very important content,

even if you don’t understand immediately, please be sure to read it!

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【Reiwa’s Double-E EA Listing】

https://www.gogojungle.co.jp/users/112481/products

Specifically categorized Reiwa’s Double-E EAs by genre

https://www.gogojungle.co.jp/finance/navi/articles/67162

(Portfolio diversification by genre is essential)

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【List of Reiwa’s Double-E Series】

https://www.gogojungle.co.jp/finance/navi/series/1700

https://www.gogojungle.co.jp/finance/navi/articles/64703

https://www.gogojungle.co.jp/finance/navi/articles/65978

Simple tips to spot fake products (in EA cases)

https://www.gogojungle.co.jp/finance/navi/articles/64738

Where to check first when you don’t understand something about EA

https://www.gogojungle.co.jp/finance/navi/articles/65619

https://www.gogojungle.co.jp/finance/navi/series/1714

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-E Beliefs】

Develop EAs with a principled approach,

gain the trust of more people,

and maintain a long-term WIN-WIN relationship,

aiming to invigorate the EA market and improve literacy.

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A Complete Guide to Choosing EAs: Assessing Reliability through Backtesting and Forward Testing

The most important thing when starting EA operation is, after all, “which EA to choose?”

Unlike discretionary trading, EAs leave objective numbers from historical data and actual performance.

In other words, by looking at the numbers you can judge whether an EA is trustworthy or not.

To do that, you should pay attention to backtesting and **forward testing (real forward)**.

Understanding these two properly and evaluating the EA from both sides leads to long-term stable operation.

Importance of Backtesting

Backtesting means validating the EA with “past market data.”

Even during turmoil like the Lehman Shock or the COVID crash, an EA that shows a long-term upward trajectory is likely to be excellent.

Points to specifically check are as follows:

Long-term data (from before Lehman to the most recent) shows a rising trend

Recovery factor (net profit ÷ maximum drawdown) is at least 10x over 10 years

Spread settings are realistic

Expected profit per trade is sufficient

Is the EA based on opening price movement

If these are cleared, you can at least judge there is value in the EA.

Importance of Real Forward

No matter how excellent the backtest is, the crucial question is whether the results are reproduced in actual market conditions.

What needs to be checked here is real forward testing.

Key points are as follows:

Whether it follows the pattern of the backtest

There is at least a year of live trading history

Don’t swing with short-term results (there will be drawdowns)

Also check Recovery Factor as with backtest

Real forward is evidence that the current market environment is truly applicable.

Choose EA by Backtest + Forward

In conclusion, when choosing an EA,

**Verify whether it passed in backtesting (used in the past)**

**Verify whether it is still usable in forward testing (current applicability)**

This two-step approach is most important.

Backtesting is the “map,” forward is the “actual journey.”

Even if the map is drawn correctly, it’s useless if you can’t walk the path.

Only when both data are available can you call it a long-term, reliably trustworthy EA.

Summary

As a summary for choosing EAs:

Backtesting measures the ability to endure all past markets

Real forward measures the ability to reproduce in current markets

Only when both are present can you determine an EA that you can safely use long-term

To do that, you should pay attention to backtesting and forward testing (real forward).

Verify whether it passed in backtesting (used in the past)

Verify whether it is still usable in forward testing (current applicability)