Backtesting using LIVE or DEMO history data?

These days I'm backtesting an EA using Alpari UK live and demo history data. The results I get are not comparable. This makes me believe that if the aim is running an EA in a live account there is no advantage backtesting it using history data from a demo account. So, what's the point on running testing or optimising an EA using a demo data feed?

There is no such thing as demo and live data for backtesting, as far as I am aware. There is only the one set of data which I believe comes from MetaQuotes themselves.

Here are some things to be aware of when backtesting.

The spread is fixed at the point you start the test, not quite after the start button is pressed, I think it's after it's finished spooling through the history file. So start a test on a variable spread broker and you'll get differing results depending on what the spread was at that instant. If you are scalping small targets or using small stop losses this can make a world of difference.

If you are using Alpari to backtest be aware that the demo account uses the spread from their pro accounts, which are smaller spreads than a standard live account.

Also, minute history is the smallest you can get from MetaQuotes, not tick data. So ticks are interpolated within each minute bar. I think from one backtest to the next this can vary slightly as well. So, again if you are dealing with smaller pip sizes then you will get different results.

There are also gaps in the data where some date ranges are missing. The gaps can vary between brokers for some reason. This will affect backtesting with pretty much any indicator and will give false results over some periods. For example using a large moving average such as 200 day moving average is quite frankly pointless in backtesting.

I'm sure there are other issues with backtesting that I'm not aware of but these are the main ones I can think of.

I always say that backtesting is a good start point and I ditch an EA if it isn't profitable over a long backtest period. If it works over backtest then forward test to ensure the EA trades correctly live.

Of course there is then no replacement for a live account.

Hi Steve,

Thanks for such a master class on MT4 back testing! 😉

I understand that I can get any history dataset but its better to do the backtesting in my MT4 terminal logged in a live account so it will use the spread from it.

I just started collecting M1 data from the live trade server and simultaneously testing the EA. Later I can backtest the EA using the collected data an compare the trades to those already done in real time. Dunno if its worth the hassle, I believe this way I can check that the backtested EA is performs the same way as it did in real time.

Regarding parameter optimisation, what is the best way to select the right EA setup resulted from the optimisation? I know that I have to discard the extreme results with high/low yields, but the middle yet contains lots of useful results with dozens of variations. In all, it could take many months analysing and testing the results 😲 ... thinking now to spend that time learning manual trading instead 😁

Running back test can give you the possibility outcome might happened in live account EA.

But of course, there are exception as also depend on your EA how it feed on Data and able give you the closest accuracy of outcome.

Here is an example of 9 year back test result of my favorite Martingale EA, which have the potential to survive over years.

https://www.myfxbook.com/community/trading-systems/seeker-skyline-alpari-uk/35829,2#?pt=2&p=1&o=35829