Backtesting is a key component of developing an effective trading system. It is performed by recreating trades that would have occurred in the past, following rules set by a given strategy using historical data. The outcome provides statistics to assess the strategy’s efficacy.
Due to the importance of backtesting in forex trading, various companies have developed backtesting software that helps traders test their strategies on past data to use it in automation to take future trades. In this article, I will review one of the well-known strategy testers, “forex tester 5”.
Few forex products significantly impact how a trader trades and learns to trade. In truth, most forex products have mediocre development and an oddly uncomfortable design. The exact opposite is the forex tester. In truth, a forex tester is one of the few products that can make you able to trade effectively or may lead you to blow a forex trading account.
Forex tester 5 is a dedicated forex trading backtesting software that allows you to backtest mechanical strategies. It can also replay price action for manual backtesting strategies.
Before you continue reading, let’s discuss what to look for in a trading simulator. This will give you a good sense of the scope of our review.
Using a trading simulator serves two purposes.
Only a high-quality simulator can achieve these objectives effectively. At the very least, it must be realistic and provide high-quality trade records. It should also be simple to use, so you don’t have to spend time on the learning curve.
Furthermore, your simulator must include the trading tools required to implement your trading strategy. Finally, examine the expense of the simulator with the value you may derive from it. For example, time savings, realistic backtest, and opportunity costs.
In this forex tester review, I will address these five topics.
Forex tester 5 has various settings to ensure realistic backtesting and replay.
Most simulators enable you to establish your account balance and, if necessary, reset it. Forex tester goes a step further. It also allows you to record deposits and withdrawals from the account under the Orders menu.
Spreads, lot size, and leverage may be set for each pair in its well-organised data centre. You may ensure consistency between your testing and live experience by customising them precisely to your broker’s specifications.
You may use a forex tester to establish floating spreads that vary depending on market conditions. This is an advanced feature that enables much more realistic simulation. To use floating spreads, however, you must upgrade your data package to incorporate tick data.
Price data reliability is critical for practical backtesting.
Forex tester includes free basic forex data from Forexite. It includes forex data for 7 majors, 9 crosses, and 2 metals, all the way back to 1-minute bars in 2001 (almost 20 years of data!).
This basic forex data package is sufficient for higher time frames (daily and above).
There are two scenarios in which you should consider upgrading your data package.
To begin, if you want more granularity in your data, you will need to upgrade to tick data. For example, traders who use a scalping strategy will almost certainly need to upgrade for realistic backtesting and practice.
Second, you will need to upgrade if you want data for additional instruments not covered by the essential subscription. Indices, crypto, and stocks are examples of additional instruments.
Forex tester 5 provides a realistic simulation thanks to its custom settings and data sources.
You should not expect anything less from a dedicated trading simulator.
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You don’t want to waste time figuring out how to use a new simulator. You want to begin as soon as possible.
The work is to concentrate your time on constructive activities such as backtesting and replay practice.
Let’s look at the forex tester learning curve.
Forex tester has a similar layout to MetaTrader 4 (MT4).
While not a replica, the forex tester will be familiar to MetaTrader 4 users.
This is a huge plus.
This familiar style shortens the learning curve for experienced MT4 users.
If you are a beginner forex trader, you will almost certainly use MT4 to transition to life to trade. Using a forex tester will aid in a quick transition.
Furthermore, there is good news for non-English speakers looking for ease of use. English, Japanese, Portuguese, Russian, Vietnamese, Spanish, Polish, Hungarian, German, Czech, Dutch, Indonesian, Slovak, Italian, Thai, and Turkish are among the 16 languages supported by forex tester.
The first step you should do when you launch forex tester is to download the market data you’ll need for backtesting.
I could download the forex data using the data centre with a few mouse clicks.
There are also prominent buttons for essential functions such as:
In addition, there are 13 video tutorials to help you get started.
When it comes to chart options, such as adding indicators, you may do it with a right-click on the chart. You may also use this method to send trade orders.
With these features, it is straightforward to begin manual backtesting with market replay.
What about individuals interested in using forex tester for automated backtesting?
Forex tester 5 accepts.dll files. You may add.mq4 EAs or indicators to the forex tester 5 programme via the file -> Install -> Install New Indicator/ Install New Strategy menu so that it can try to convert them to the forex tester format. (It may not work well for complex strategies.)
Furthermore, the same developers that created forex tester 5 have created another fantastic product, the Easy Forex Builder (EFB).
EFB is a powerful tool that allows anybody to build their own forex trading strategy using an intuitive-to-use drag-and-drop interface.
It provides you with a graphical interface via which you can construct your trading strategy. To personalise your trading strategy, you may combine indicators, price, time, and volume with various conditions.
The best aspect about this tool is that your strategy will be created for forex tester and MT4. You can easily apply the same strategy in live trading. Fantastic feature.
For the moment being, the EFB is free, and you should take advantage of it if you’ve always wanted to build your own EA without coding. However, automating backtests of sophisticated strategies may be challenging depending on your programming knowledge.
A simulator’s ideal design should be so intuitive that you can figure out everything independently.
However, this is not always the case because each trader starts from a different background. You can get stuck and require support from the forex tester company.
Fortunately, all forex tester users receive lifetime support from:
Only if forex tester is well-established and stable is lifetime support valuable. They’ve been around since 2006, according to their website. It will help if you decide whether a 15-year track record is something you can rely on.
Overall, the user-friendly interface of the forex tester makes it easy to get started. Furthermore, support is available through a variety of channels.
To learn well, you must practise and formulate strategies using various tools.
Forex tester contains over 60 built-in indicators, and they are constantly working on adding new ones. In addition to the standard trading indicators, several are more exotic, such as Solar Wind and Polarized Fractal Efficiency.
Those of you who use custom indicators in MT4 can add the.mq4 file into forex tester 5, and it will try to convert your indicator into forex tester format. However, because this feature is still in its early stages, it may have difficulty converting complex indicators. Before employing your converted indicators, double-check them.
As a price action trader, I paid close attention to the drawing tools in my review.
They were adequate for my trading style. I was able to draw trend lines and channels quickly. For instance, the Polyline tool was perfect for marking price swings.
Forex tester also includes tools for more specific trading styles, such as Andrew’s Pitchfork, Elliot Wave, and Fibonacci.
For more efficient analysis, you may assign hotkeys to each drawing tool. This is a feature I frequently use. I can efficiently draw on the chart by mapping it to the hotkeys I’m familiar with on other platforms.
There are other non-time-based charts available, such as Range and Renko charts. (This is accessible via the File menu.)
Fundamental news is an important part of many forex traders’ trading strategies. Forex tester includes historical news records that you can overlay on your charts with a simple toggle. This ability enables you to learn how news impacts prices.
To summarise, forex tester includes trading tools that are comparable to those found on most forex trading/charting platforms.
You may backtest multiple currencies in multiple time frames. The layered results may provide you with extra insights.FAANG stocks - Top 5 tech stocks on Nadaq— 2023
Manual testing can be used to practise trading with historical price action. It is basically a replay function that is valuable for a new trader who wants to accumulate screen time.
Screen time is the time spent analysing the market as price action unfolds. Being able to replay the market at a faster rate will help you progress more quickly.
Projects are used in forex tester to manage your backtests. Each project is independent.
In one project, you can try using an automated approach. You can start a new project for discretionary trading in a different currency pair simultaneously.
You may start as many projects as you like, each with a different focus. Projects provide a convenient way to manage your backtests and practice sessions.
Record keeping is another crucial aspect of effective learning. Forex tester 5 seamlessly records your trades and calculates valuable summary statistics.
You may move the charts to show a specific trade in your account history by double-clicking on it. One of my favourite functions is the quick and intuitive link between trade records and their charts.
For most traders, the statistics given by forex tester are sufficient.
However, if you want to drill down for more information, you can easily do so because the data can be exported to Excel with only two clicks.
This export function is handy to me. I can run simulations and perform complex analyses on my trades using the data in Excel.
A good trade record includes a screenshot of the chart. It only takes one click to capture a screenshot of the chart.
The forex tester record-keeping ability is both convenient and comprehensive. It is incredibly beneficial to any serious trader’s learning process.
We’ll consider whether forex tester 5 caters to different trading styles in this area.
Depending on the complexity of your trading strategies, you may need to devote more effort to convert them to use in forex tester for mechanical trading. However, the tools available to help you in this area (such as EFB) are improving and will continue to improve.
Consider the time and effort required to convert your trading strategies for forex tester 5.
It is not challenging for someone comfortable with programming. As a result, depending on your coding proficiency, this may not be a concern.
During an automated backtest, forex tester allows you to view the charts. Many platforms do not show the charts until the backtest is completed. This is an excellent advantage if you’re looking for real-time insights.
Furthermore, you may adjust the strategy parameters on the fly.
If you don’t mind the possibility of having to code separately for forex tester, you’ll find it to be a capable backtesting platform.
Forex tester is great for price action traders that trade on the fly. The learning curve is short, and the drawing tools are robust.
The ability to replay price action is critical for discretionary traders. And forex tester excels at it.
Discretionary traders often use indicators. Indeed, many discretionary traders, like myself, employ custom indicators to help in analysis. As a result, the ability to import custom MT4 indicators into forex tester is a huge plus.
Scalping takes at high speed with uncertain trade execution. As a result, it is one of the most challenging trading styles to backtest consistently. This holds true regardless of platform.
If you are a scalper, you must upgrade to the VIP data subscription for tick data to enable floating spreads. As a result, you must factor this into your budget.
Although not perfect, this feature will allow you to backtest a scalping strategy with reasonable reliability using forex tester.
This setup, however, will be more expensive. Finally, forex tester may calculate the appropriate number of lots based on a percentage risk model. This is a valuable feature for scalpers who prefer to concentrate on the action rather than calculating their risk exposure for each trade.
You must upgrade to the higher tier of data subscription if you intend to trade indices or stocks.
You should use the page’s filter list to see if the same symbol is listed. Do not assume that the same symbol you wish to trade is available in forex tester until you find it on this list.
Forex tester offers the function to create custom instruments and import your own data. This is a possible but inconvenient workaround.
As a result, if your trading instrument is included in a paid data subscription and you are willing to pay a premium for an upgrade, forex tester is an excellent choice. If not, there’s no compelling reason to use forex tester.
Stick to your demo trading platform if you’re happy with it.
This is especially true if the platform is the one you will be trading on when you switch to a live account.
However, if you are happy with the functions or cost of your current simulator, consider forex tester.
Based on the information presented above, you should know whether forex tester is a good fit for your trading needs.
As a result, there are just two additional things to consider at this stage.
The regular price of forex tester 5 is $299 (at the time of writing this review), including free basic data.
For forex tester, there are three data levels. Standard and VIP subscriptions are paid.
Consider the following factors while deciding which data subscription you require:
Forex tester 5 provides the best value for swing traders looking at daily and higher time frames. The free basic data plan is sufficient, and you will only need to pay once for this fantastic tool.
You can pick between monthly or yearly recurring payments if you need to upgrade your data package to Standard or VIP. There is also a one-time lifetime payment option if you intend to use forex tester for a long time.
It makes perfect sense to pay a small price for an excellent tool that will help you improve your trading skills. Especially given that many traders lose significantly more than the cost of forex tester in reckless live trading.
I strongly advise downloading the trial version before purchasing forex tester 5.
In many aspects, the trial version is limited. However, it offers enough information for you to evaluate the software meaningfully.
Although this is a well-respected product among traders, there are some pros and cons to consider before making your decision to purchase.
Lifetime and multi-channel support
Easy import of price data
Realistic backtesting environment
A comprehensive set of trading indicators and drawing tools
Works for both mechanical and discretionary traders
Seamless export of trading records
You might have issues using complex custom indicators and strategies
It might not be suitable for non-forex traders
You might need a data subscription (in the form of recurring charges or a one-off lifetime payment)
Windows OS only
The verdict, forex tester 5 is one of the market’s best simulators for forex traders. The platform comes with a vast range of features and historical data, making it the most valuable tool for quickly gaining experience and potential testing strategies.
But with so many pros, there are many disadvantages of using the forex tester, which are already addressed under the cons section of this review article.
Yes, manual and automated strategies can be tested; however, automated strategies must be created in forex tester format.