Forex System Creation: EAs and Strategy Testing (Part 1)

Filed under: Learn Forex Trading |

Screen shot 2013-03-20 at 10.06.16Today, as part of a two part article, I am going to talk a little about system creation in the forex markets – with particular attention being given to expert advisors (EAs) and strategy testing software.


To begin with, a really great book about system creation is a book called ‘Way of the Turtle’ by Curtis M. Faith. This teaches you all about the ins and outs of system creation, including issues such as optimisation, maximum drawdowns, and more advanced statistical tools such as the Sharpe ratio. There is almost everything that you need to know about system creation for the financial markets in this book – and even better, it is written by someone who has been there and done it on a mass scale.


If you want to create a workable forex trading system (rather than a discretionary methodology such as price action trading at key areas of support/resistance), then the first thing you have to do is come up with a hypothesis to test. It has to be something that makes logical sense – and something within the scope of your testing abilities. Do a visual test first, and if there seems to be something there, then you can move on to the next step.


That next step (if you are trading with popular trading software Metetrader) is to create a workable expert advisor (EA) so that you can use Metatrader’s strategy tester console. The Metatrader strategy tester allows you to test your trading strategy with historical forex data. However, in order to use it, you must first have an EA, and creating one of these can be a little tricky – unless you have computer-programming experience. However, luckily, there is one website that I know of that does all of the work for you.

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