Forex Tester fills the gap where Metatrader leaves off

I love Metatrader and think it is one of the best trading platforms out there. I love their business model that doesn't have expensive barriers-to-entry for the small trader. Just because it's "free" doesn't mean it isn't awesome.

But Metatrader has some limitations. Specifically I have learned over the years that the "backtester" portion has some problems. Whether or not these problems/issues/limitations are "flaws" is really a political argument I think. The fact that they exist at all and are constantly questioned by reputable traders is enough of a red-flag for me. In a nutshell, I would say that Metatrader primarily excels as a trading platform, but not necessarily as a tool to build your strategies. This is not to say that MT can't be used as your strategy-building tool of choice, but I think that there could be better tools out there.

First some definitions. When you hear people talking about Metatrader and backtesting, they are probably talking about a specific feature called "Strategy Tester." The brilliant design of Metatrader actually incorporates multiple ways to trade with the platform including automation options. You can use Metatrader in "manual" mode and have full control in realtime. Or you can take advantage of automation features like "Expert Advisors." An EA is a program that runs inside of the platform, and can advise a human trader on-the-fly or even fully control trade entry/exits if you choose. The level of control you give to an EA is your choice. But the point I am getting around to making is that... I think the "Strategy Tester" is actually only useful for automated EA robot strategies. This is one type of "backtesting," and usually the one people are referring to when they speak of Metatrader.

I am referring to a completely different type of testing... and for clarity I'm going to call it "historical testing." Historical testing is something you do as a manual trader in order to build a new strategy. (It could also be automated into an EA/robot later, but you've got to start somewhere.) A good analogy would be DVR technology: you pre-record a movie and then you re-live that movie at some point in the future by rewinding the DVR and stepping forward historically. You have added flexibility to pause and skip commericals, etc.

I am referring to the same concept with historical testing -- you basically rewind the time to a previous point in history and then move forward bar-by-bar and practice executing your strategy. You can also take this time to just study the market in prep for a new strategy. This method works extremely well and has the added benefit of accelerating the research period in developing a new trading strategy. For example, being a Dad, I obviously have a very limited and rigid time slot to devote to trading research. For me this time is either 1) after the kiddos are tucked in, or 2) in the few early hours I can get up before work. With historical testing, you can start following (for example) EURUSD from January 1st, 2007 through June 15th, 2007 and possibly get that all done in one study session. This is highly compressed but nearly just as valuable as real life!

This process of historical testing is something critical to developing a new strategy that my mentor has taught me. If I had to pick one thing that she taught me that revolutionized my approach to learning how to trade, it might be this one. I can remember a day way back in the beginning where I did not grasp this concept. My mind was focused on practice trading in realtime. Her comment was... "well you could do it that way, but you might be old and wrinkled before you come up with a winning strategy." Using historical testing I was able to fully process years of data in a very short time span.

Ok, back to the original theme of this post... the tools provided in Metatrader are acceptable but not ideal for manual historical testing. Recently a friend trader of mine discovered this tool called Forex Tester. I don't think he realized what a gem he had stumbled onto. It is very interesting to me because it seems that this software was specifically written to overcome those limitations in Metatrader. It was also apparently designed by a Metatrader user, because the interface closely mimics and simulates the platform -- so no major learning curve!

I am very excited to dig-in and learn what this software offers. I will share more here as I learn, but today I am reading the manual. Here are some excerpts I want to comment on:

...You do not need to train in real time, waiting for days and weeks to test your long term strategies, Forex Tester will pack this time in hours and minutes and the speed of testing can be adjusted...

...The precise market simulator engine handles swaps, spreads, margins and other market parameters. You can see the results of testing as profit diagrams including: balance, margin, equity and drawdown...

...A very important feature is that you can create and test your own strategies. The program includes an open interface with complete documentation and examples. We are proud to present the fastest and most precise testing engine that implements the following features:

Calculating every tick not just "close" prices of bars.


3 different types of ticks generation.

Precise calculations, using swaps, spreads, margin calls. (sidenote: I don't think MT can do this)


Processing unlimited number of currencies together. (sidenote: MT cannot do this)


Testing unlimited number of strategies together (Portfolio of strategies). (sidnote: MT cannot do this)


Ability to process years of historical data tick by tick. (sidenote: due to recent changes, I believe MT can no longer import tick data for testing)


Fast processing mode and Visual processing mode.

Extented statisctics.

Logging of strategy execution.

The advantages of being able to "replay" the market DVR-style are huge. And besides... who has time to sit in front of a computer day after day without even knowing or being able to trade your strategy yet? That's enough to make someone go mad and give up altogether.

Studying in my underwear

I was up before the sun came out this morning, studying my new book Trade Your Way To Financial Freedom by Van K. Tharp. I found this book by accident while hunting through Amazon for something else. The decision to buy the book was made solely on the reader comments left at Amazon. I knew this would be an exciting read and I've actually had the book sitting on my bookshelf now for quite awhile, waiting for a good opportunity to consume it.

The only problem is... those opportunities are few and far between these days. It is rare that I would actually have any peaceful time in my schedule to sit down and study a book without interruption. Working at the dayjob is always hectic (or at least, I should say that I never can seem to find any "free time" with my ever increasing to-do lists). After battling evening rush hour, I'm back home to the hoppin' kids and frazzled mom who's been trying to contain them long enough to get some work done herself. I throw dinner on the grill and then race through my chores to hopefully save a few moments for reading later. Alas, by the time the kids are in bed and my daily routines are finally over... aside from the fact that it is my bedtime, my brain is now too fried to start a study on trading.

But trading is something I must find a way to make time for. It is my alternate lifestyle, one that is under development and in constant need of nurturing. I hope that one day all this learning will result in a tangible output that can actually demand more of my time. In other words, I foresee the day when I will begin phasing-out my other obligations (ie the dayjob) in favor of more lucrative time spent in the markets. The cool part about this dream is that there is no comparison between (any) dayjob and trading: to accomplish an equivalent 8-hour workday of output may only take 1 hour of effort. That means I'll have many more hours to spend with my family.

I've read many books over the years, and so far this one seems very on-target to me. It seems to encapsulate a lot of the wisdom I've learned through experience in trading to date. Also, I think I would have to say that this is not a "beginner" book. Some of the concepts presented are deep and might only be evident to someone with prior experience. I think if I was reading this book as a primer to trading, I might not grasp the difference between Tharp's concepts and your run-of-the-mill "How To Trade" book. I also believe that there is a lot of legitimacy to Tharp's teaching for the sole reason that (at least as of chapter 9) he has not yet tried to sell me anything. I'm adding this book to my "highly recommended" reading list.

Historic times

These are historic times for the markets -- times we haven't seen before. I'm never quite sure how to interpret the day-to-day events. All the gloom & doom talk on business radio is interesting to me, but I try to stay always a few steps removed from this drama. My trades are based on well-tested strategies and if I'm in a trade, that means I'm following a plan. When you have a plan, there is no reason to worry. It's actually pretty cool to listen to all that drama unfold in realtime... to be able to sit back and smile without any anxiety or worry... that is the beauty of having your own mechanical trading plan.

My point is that I think markets are very unusual right now, which could make for a great landscape to learn on. If I can develop strategies to work in these tough times, it's bound to be smoother sailing when we hit the next bubble. I began trading in the midst of the internet bubble pre-2000 -- and in those days, making money really was easy.

Aspirations: rules to grow by

This isn't my first time diving into trading... far from it. I'm actually probably on version 3 or so by now. Each "version" is a major restructuring (and hopefully improvement) of what I've done in the past. I try to take a step back and self-analyze my own trading activity, taking note of problem spots that need work.

In this round, I've concluded that I need some ground rules I can refer back to. There will come times where I'm distracted and venturing off into new and exciting initiatives. But if they are not aligned with my bigger goals and aspirations, then the timing is not right to be looking at them. I need to establish boundaries and constantly keep guard on my focus. As a person who struggles with ADD, I think this is going to really help:

Open-source development I'm a strong proponent, so investing in closed-source would be strongly contrary to my beliefs I strongly believe in collaborative development I believe that it is not possible to saturate forex market with any particular trading style In other words, I'm not afraid to share secrets/ideas with others I believe others will contribute ideas that help me excel, and vice versa I'm completely uncomfortable with closed-source robots No way to fully understand their workings No way to fix or improve them Not a good prospect for long-term success I'm somewhat uncomfortable with closed-source indicators I should consider these as a last resort only Make my own trading decisions I strongly believe that allowing other people to manage my money is a dead-end road I believe that I must learn myself how to handle my own money if I am to excel in the long term I should develop my own trading strategies, even if it takes longer to excel as a result I believe that the best trading strategies would be personally discovered and developed by myself Any system that does not allow me complete understanding and control of trading decisions should be avoided

Where I've been... where I'm headed...

They say persistence is a critical quality found in master traders. I can definitely attest to this. It has been over 10 years now since I first took interest in anything financial. But that's ok, because I'm still here. My account has gone bust a few times, but that's ok too -- I see that as part of my required trader tuition.

Back in the day, I thought I was a hotshot because I understood and traded stock options -- the wild and frenetic game that mixed a little math with a little more risk and was sure to payout big. And it did for me... although it was a bit of a roller coaster at times. When the internet bubble popped, I realized that anyone with even a basic understanding of markets could have made a buck. In other words, I was on the bandwagon with most other traders riding the coaster up the big mountain and rolling it hand-over-fist. Trading seemed very easy and I couldn't understand why everyone wasn't doing this.

But at some point, reality set in and I realized that I didn't have a solid plan anymore. Market dynamics changed dramatically after the bubble burst. Nothing worked consistently and trading became "difficult" to me. Was it beginners luck? I couldn't believe that -- after all that theory has about as much merit as the Super Bowl Indicator. I became disenchanted with the markets, and with constantly defending the ever-declining account balance with my better half.

After some time off to let my brain percolate, I began to venture out into the jungle again. Through various research and new friend connections, I began to study the markets from a different perspective. I came to the realization that the US Markets are like a tiny pinpoint of highly-regulated activity. The broader universe of trading markets was becoming visible on my radar, and it was scary, exhilarating and overwhelming all at the same time. Since that realization, I have spent 100% of my trading research focused on finding my niche in the global trading marketplace. I believe there are millions of opportunities in this marketplace, and I will only need a handful in my toolbox to succeed.

Fast forward to 2001. All that fun in the bedroom has given me the most wonderful and life-changing experience -- we call her "Caroline." She's made of sugar + spice + everything nice. Not sure what I was supposed to do, and didn't even know who I could ask directions of if I wanted to. Thankfully, my better half had this all figured out (apparently) and she also had a plan. Her plan has worked so far, and in fact today I have two munchkins, both very female. Caty was born in 2007 and brought her own attitude to boot. Gotta love family dynamics -- I bet God sits up in the clouds and watches our lives play out like an entertaining sitcom.

Now that baby-making is on hold for the time being... I'm trying to refocus on trading. But this time the objectives are different because now I'm a daddy. I can no longer take the wild and uncalculated risks of a newlywed haphazardly gambling away his precious bachelor-stake. I've become a warrior, and my objectives are now to slay dragons and save my Princesses. We men are cutout to do this stuff instinctively, but it definitely isn't "easy" as I once thought.

There is another dynamic at play here as well. In most of the trading magazines I read, I've noticed that many (most?) professional traders seem to be NOT family men (sidenote: not trying to be a chauvinist, but to my knowledge hardly ANY women are pro-traders). In other words, the survival mode that we men have is now strongly invested in developing and protecting my family. This means I must hold down a steady job, be a good father, and hopefully a great husband. Somehow in that mix I need to also find the energy to develop myself into a trading warrior. I must learn how to fight smarter and optimize if I plan to get ahead.

The purpose of this blog is twofold. Firstly, I plan to document my learning methods and hold myself accountable through this public forum. I'm not sure why this is true, but men seem to have a very difficult time admitting when they are wrong. I need to fix that because unwillingness to admit and identify faults could impair my ability to become an expert trader. Secondly, I need to give back to the community in order to fully realize my own potential. This is part of my personal being, and I believe it is critical for growth.