11/11★Sometimes I borrow the power of ChatGPT 第181話【How to read backtest data】
FX Automated Trading, the EA developer Reiwa’s Double I-E.
Since last year, I’ve been writing this series almost every day.
We’ve probably continued for nearly two years now!
If you read what I’ve written so far,
I’m confident you’ll get closer to better EA operation.
And, since I’d like to take a short break,
I’ll continue posting with the help of ChatGPT here.
Occasionally I’ll post irregularly, like before.
How to Read Backtest Data
What’s important when choosing an EA is to judge with objective data.
Among them, backtesting is an indispensable criterion.
Here, I’ll explain the points you should check at a minimum when selecting an EA.
Whether it has long-term upward slope
Backtest over a period from at least “before the Lehman Shock” to the most recent,
and that the profit-loss curve is upward sloping is a prerequisite.
EAs that only win for a short period are likely unable to withstand ongoing operation, so beware.
Check the Recovery Factor
Recovery Factor (net profit ÷ maximum drawdown) is an important indicator of an EA’s stability.
In my experience, ideally a “ratio” of 10x over 10 years is good.
Also, confirm whether profits are steady every year.
This can be checked with tools like Quant Analyzer or Rock Lizer.
Whether the spread setting is appropriate
Backtesting results vary greatly depending on spread (transaction costs) settings.
Be sure to test under conditions close to actual trading.
Be wary of EAs tested with unnaturally narrow spreads.
Whether there is an expected edge
Expected edge means the average P/L per trade.
Having a positive expected edge with a sufficient magnitude is a must for long-term wealth growth.
Sometimes it’s expressed as “expected gained pips.”
Is it based on open price action?
Ensure backtesting is conducted in a regime that uses open-price action (opening price decision).
It’s important that tests are not done with artificial optimization using tick data, but under conditions close to real operation.
Summary
EA that clears these points can be trusted as a “good-to-pick EA.”
Long-term upward slope
Recovery Factor above the standard
Reasonable spread settings
Sufficient positive expected edge and positive
Open-price action validated
Also, win rate varies by EA type, so it isn’t a solid evaluation criterion.
For example, scalping has high win rate, trend-following has lower win rate, but is small loss, big profit.
What matters is not the win rate, but the profit-loss difference and the stability of total net profit.
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【Flow from Starting to Intermediate: EA Activation】
First, mastering “EA installation” is essential.
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MT4 EA (Expert Advisor), Indicator Installation Procedures
https://www.gogojungle.co.jp/post/1/8212
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※GoGoJungle Video Version※
At first, it’s not possible to understand everything at once, and I’m sure many will stumble.
I also stumbled many times at first, so don’t rush, you’ll be fine!
If you have questions, use the “Contact Form”!
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■ GoGoJungle “Contact Form”
https://www.gogojungle.co.jp/inquiry
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【How to Choose an EA】
Now that you’re ready to operate an EA,
you might think, “I can’t tell which EA will win… I don’t want to lose.”
So Reiwa’s Double I-E has published the following articles to help you determine some of the quality via backtesting.
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■ How to find winning EA from backtests
https://www.gogojungle.co.jp/finance/navi/series/1714
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Forward testing is important, but
backtest data backs it up.
The backtest period is usually longer than the forward period,
and whether you win in forward tests is largely inferable from backtest evaluation methods.
【How should FX risk management be done?!】
And even if you obtain a highly capable EA,
you can fail if you neglect risk management in FX.
So for EAs, how should risk management be done?
The following articles answer this.
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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, the EA operation mindset is also important.
For those articles,
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12/30★ Year-end and New Year SP!! All-in EA Course Part 3
https://www.gogojungle.co.jp/finance/navi/articles/80551
8/12 [Obon Holiday Special!】 Now you too can be an EA Master! “EA Operation Improvement Mindset”
https://www.gogojungle.co.jp/finance/navi/articles/72829
8/17 [Obon Holiday Special!】 Now you too can be an EA Master! “Notice during EA operation”
https://www.gogojungle.co.jp/finance/navi/articles/73797
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And so,
the content is quite substantial and very important,
even if you don’t understand it right away, please make sure you read it!
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【Reiwa’s Double I-E EA Listing】
https://www.gogojungle.co.jp/users/112481/products
Specifically, I categorized Reiwa’s Double I-E EAs by genre
https://www.gogojungle.co.jp/finance/navi/articles/67162
（Portfolio diversification by genre is essential）
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【Reiwa’s Double I-E Series Articles】
https://www.gogojungle.co.jp/finance/navi/series/1700
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https://www.gogojungle.co.jp/finance/navi/articles/64703
https://www.gogojungle.co.jp/finance/navi/articles/65978
https://www.gogojungle.co.jp/finance/navi/articles/64738
https://www.gogojungle.co.jp/finance/navi/articles/65619
■How to find winning EA from backtests
https://www.gogojungle.co.jp/finance/navi/series/1714
■No-nonsense! GoGoJungle Problem Posing!
https://www.gogojungle.co.jp/finance/navi/series/1701
https://www.gogojungle.co.jp/finance/navi/articles/64723
■Reiwa’s Double I-E releases the “Pullback Buying / Retracement Selling” logic!!
https://www.gogojungle.co.jp/finance/navi/articles/65010
https://www.gogojungle.co.jp/finance/navi/series/610
【Reiwa’s Double I-E’s Beliefs】
Develop EA using solid methods,
and earn the continued support of many people,
maintain a long-term WIN-WIN relationship,
aim to invigorate the EA market and improve literacy.
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