3/18【Backtest Evaluation Method】We explain all items of the backtest image17

EA developer Reiwa's Double-E is

To begin with

EA developers measure the goodness or badness of an EA

by checking via “backtesting.”

Therefore, as users

to “discern the goodness or badness of an EA,”

you need the skill of evaluating backtests.

With that in mind, this series will

describe how to find winning EAs from backtests.

【Expected Profit】

Here we go,

this time it’s about “expected profit.”

This item is often overlooked, but

it is actually an extremely important item!!

“Expected profit” is calculated as net profit ÷ number of trades.

In other words, the profit you can expect per trade.

For example

for a 0.1 lot USD/JPY backtest

net profit is 500,000 yen and the number of trades is 1,000, then

500,000 ÷ 1,000 = 500 yen,

that is the expected profit.

In other words,

500 yen for 0.1 lot equals 5 pips.

As a guide, if the set spread is around 1.5 pips for USD/JPY,

you’d want 2–3 pips, or 200–300 yen or more per 0.1 lot.

If this figure is positive, the net result is positive.

If this figure is negative, the net result is also negative.

In other words,

by looking at the two items—set spread and expected profit—you can determine whether you won’t be spread-limited or where the break-even point is.

I personally call this expected profit the “buffer.”

During early mornings or at times of major economic indicators when the spread widens,

it is essential that the buffer of the expected profit is adequately secured.

Otherwise

in real trading you can suffer a “spread disadvantage,”

and the reproducibility drops sharply.

As one way to judge whether backtests reproduce,

be sure to check this item.

Check the expected profit together with the set spread.

Even among EA developers, some don’t notice this,

and some publish with a low expected profit without ill intent,

so users who purchase and actually use them should also check.

That’s all!

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【Reiwa’s Double-Ei EA Listing】

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

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【Reiwa’s Double-Ei Series】

■EA Beginner Course

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

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About “How to calculate EA risk management”

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

Simple tips to spot bad products (in the case of EAs)

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

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

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

■No-nonsense! Gogojan Issue Debate!

https://www.gogojungle.co.jp/finance/navi/series/1701

Where is Gogojan’s inquiry form?

https://www.gogojungle.co.jp/finance/navi/articles/64723

■ Double-E FX Ramblings

https://www.gogojungle.co.jp/finance/navi/series/610

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【Reiwa’s Double-Ei Beliefs】

Develop EA by straightforward methods,

gain the trust of more people,

and maintain a long-lasting WIN-WIN relationship,

aiming to activate the EA market and improve literacy.

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