"How To": Evaluation of trading advisors' efficiency

The efficiency of an Algorithmic Expert Advisor is evaluated first of all by how much profit it has brought over a period of time. But profit does not allow evaluating the level of risk, so the second main criterion is the quality of backtesting.

Parameters for estimating the Expert Advisor's efficiency:

The nature of equity on the last trade. The transition of equity on the last trades to the horizontal or rounding downwards indicates that the Expert Advisor is having troubles. It is not recommended to run it on a real account.

Main backtest indicators. A maximum number of uninterrupted profitable and losing positions, the largest profit and loss, the maximum drawdown, and the recovery factor.

Absence of abnormal drawdowns at crisis points. This means that in case of force majeure, the Expert Advisor will not lose the deposit.

Testing does not provide a 100% guarantee that the Expert Advisor will also work on a real account. The reasons: the presence of slippages, floating spreads, fundamental factors - all this cannot be laid down as input data. But if the tester of Forex Expert Advisors shows a loss even in history, the robot does not work.

Tips for optimizing algorithmic trading

Most of the tips relate to testing. If the advisor has been tested successfully, most of the task is already done. Tips:

• Practice multi-testing. Run the Expert Advisor on several currency pairs in the same timeframe. The universal Expert Advisor should show relatively the same statistical results. Deviations are allowed only in the case of testing assets, which differ greatly in their liquidity and volatility. Some trading platforms allow simultaneous testing on several assets. For example, if MT4 allows only sequential testing, MT5 allows parallel testing.
• Be careful when running several Expert Advisors on the same asset. In theory, this is allowed - each EA has a parameter MagicNumber in the settings, by which the Expert Advisor distinguishes its deals from other ones. In practice, the Expert Advisors may conflict with each other and work incorrectly. And the second point: if advisors open positions simultaneously, there can be a violation of risk management rules. This also applies to Expert Advisors working with different assets on the same account.
• Check the performance of the Expert Advisor in critical areas. For example, during the years of stagnation in the global economy. If the Expert Advisor works steadily, even at the moments of force majeure - this is a good Expert Advisor.
• Use the principle of forwarding testing. Its essence: the tested period is divided into two parts at a 3:1 ratio. For example, the section of 1 year is divided into January-September and October-December. The first part is the main one. Optimization - parameter selection - is carried out in this part. Expert Advisor with the best parameters is launched in the last sector. If the results are similar, then we know that the Expert Advisor has passed optimization.

The main optimization criterion is that you must like the results of the Expert Advisor. Whether you set it up for aggressive or conservative trading is an individual matter.

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