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.