Testing of algorithmic trading advisors

The essence of testing consists in running the Expert Advisor on quotes history with different parameters in different conditions. Timeframes, assets, timeframes, and Expert Advisor settings, which give the best financial results at optimal acceptable risk, are determined using the method of combinations.

Rules for testing of Expert Advisors:

The number of trades. A minimum of 150-200 trades is considered to be optimal, but it also depends on the timeframe. If we are talking about the robot scalper, which opens 20-30 trades or more per day, the binding goes to the time period - the robot is chased in the area of not less than 1 month. If we are talking about intraday trading with 1-2 trades per day, 1 year is enough. For medium and long-term strategies, we recommend a period of at least 3-5 years with at least 300 trades. You can adjust this parameter on your own: gradually increase the testing period until the results become stably equal.

Nature of Equity. The deposit curve must be stably ascending. The deep drawdowns indicate the instability of the Expert Advisor. Frequent drawdowns are acceptable, but the recovery factor should be high, as this parameter shows how quickly the Expert Advisor can restore the loss after the drawdown.

Quality of Quotes. It does not matter where you get quotes, as long as they do not have gaps or anomalous prices. Testing on wrong quotes will most probably give wrong results. Quotes are often offered by brokers, but you can also download them from third-party sources. The quality of quotes can be checked by uploading them into Excel and comparing several databases.

Checking the stability of the system. According to the wave theory, the market has phases of rising, falling, and reversals at the extremums. The Expert Advisor should show stable results at each phase. In other words, the settings of the Expert Advisor are chosen when testing the whole timeframe and its individual phases. The stability is also checked in the morning, in the afternoon, etc. These actions allow us to determine the areas where the Expert Advisor shows the best results. The third type of stability test is testing on different timeframes.

The more diversified is the Expert Advisor, the more versatile it is, and the higher is its stability to the market volatility.

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