Are EA backtest results reliable?
We are Wealth Tech Systems Co., Ltd., developers of EA.
When you look at the backtest results of the EA,
you may think, “This surely will be profitable!!”
“Buy it now!!”
and feel tempted.
Of course, if the backtest results were bad, they wouldn’t be published, so all published backtest results show “good results.”What results would you get if you backtested over the same period as actual operation?
The issue, however, is whether those backtest results are reliable.
For example, if you ran the EA in operation from January to December 2019, and then backtested over that same period, would you get the same results as actual operation?
To put it plainly,
“The same results do not appear 99.999% of the time.”
There will almost always be discrepancies.
This is because many factors, such as the PC used, network environment, and the brokerage, significantly affect both entry and exit.
The question is “how much will it differ?”
Generally, about 10–60% of trades align.
In other words, an EA with a discrepancy will only match the backtest by about 10%.
If you design it so that the backtest and actual operation align during the design phase, you can increase the alignment rate; otherwise, such alignment may not occur at all.
If the backtest results and actual trading differ too much, you may profit in the short term but not in the long term, because the data showing long-term profits is based on the “backtest.”
As shown in the graph below, you can feel assured if the actual operation and backtest results align.
Actual operation (forward) results
Backtest results for the same period as actual operation
This is the performance of our EA “Inter-est..”
The alignment rate is an impressive 76%.
Creating an EA that aligns with actual operation to this extent required many years and a lot of trial and error, but it now works very well.
Long-term backtest results also show a steady upward trend.
Because actual operation and backtest results align, the reliability also applies to this kind of long-term historical backtest results.
EA “Inter-est.”
This is our pride, so please take a look for yourself.
The EA explanation page is here.
