How to test binary options strategies on the history

how-to-test-binary-options-strategies-on-the-history

Greetings, fellow binary options traders! Beginners often face the problem of how a fully working trading system suddenly stops working in the real market. And, the reason is not a broker’s fraud or in some wrong indicators. Just at the testing stage, not all factors were taken into account, or the tests were not carried out at all.

It is important to understand that any strategy, even the most trivial, needs some time for approval. It is normal for anyone to make mistakes, and especially in the testing phase, the most obvious disadvantages of freshly-created strategies emerge. In this case, if you tried looking through strategies without testing them, you realize that this approach does not guarantee good quality – there is always a chance to slip up. Demo account is also not the best solution, because it requires too much time to check, while certain trading strategies can be discarded immediately.

In this case, the visual strategy tester is almost a perfect solution. With the help of tester, you can run almost any binary options trading strategy within ten minutes, find out its effectiveness and weaknesses. After a thorough test on history, you will protect yourself from surprises on a real account and will be able to prepare better for the live trade.

Today, we review a unique tool that allows you to trade manually on history, in a simulation mode - BO simulator.

In fact, BO simulator Strategy Tester is a trading simulator, represented in the form of an indicator for MetaTrader 4. By launching the indicator in the visual MT4 tester mode, we can make trades on history, simulating the real trading.

Indicator Features

Currency pairs: Any
Timeframe: Any
Expiration Time: Universal
Trading Hours: Around the clock

Installing the indicator on Metatrader 4

installing-the-indicator-on-metatrader-4

You must have the Metatrader 4 program installed
Download the zip file with the indicator, unpack it. These files need to be copied into MQL4/Indicators folder in your terminal data directory.
To get to the data directory, click File -> Open Data Directory in the terminal.

Then a folder will be opened, then we enter the Indicators directory of the MQL4 Now, copy the files of your indicator. Close the folder, restart MT4.
Next enter your Metatrader 4 terminal, click Tools->Settings on the program’s top panel and on the Expert Advisors tab, put ticks as on the screenshot below. Then click OK.

Run the Strategy Tester and click the dropdown Indicator Then we choose our indicator from the list.

Input parameters

Starting balance: the deposit you will start trading with;
Interest payment: option interest payments – here you better specify the value of your broker;
Displayed Font: inscriptions font on the simulator control panel.

Indicator Trade Panel

indicator-trade-panel-bo-simulator

The upper part has two fields for expiration time input, for minutes and seconds, respectively. Below are the Put or Call buttons, the current price indicator and the field for indicating the size of bets.

Further, this information is displayed:

The size of the initial deposit;
Interest rate;
Current balance;
The percentage of growth;
The distribution of the types of transactions - ITM, OTM, ATM.

All the rest of the space is given for the transactions.

Each opened transaction consists of blocks with:

Option type - Call or Put;
Name of the trading instrument;
Option buying time;
Open price;
Price of the option;
Current closing price;
Remaining time to expiration;

A nice feature is a clear indication of the option expiry time. At the bottom of the block there is a horizontal progress bar, the value of which is reduced in the course of testing, reporting on how much time is left ‘till the contract expiry.

Not to put the same indicators on the chart every time, you can save the template with the needed tools, specifying the name similar to the indicator’s title (without extension). Thus, when you run visual testing the tester will pick up the created template with all the required indicators.

Testing strategy

testing-strategy-bo-simulator

Let’s try to test a simple strategy on the Bollinger bands. At the candle close beyond the channel, we sell. That is, if the candle closed above the top line, buy a Put option if it is below the bottom - the Call option. Working timeframe - H1 with an expiry time of 15 minutes.

Cascading signals when the candles close one by one beyond the channel boundary should be ignored.

We make transactions as a result of new trading signals, as shown in the picture below.

Conclusion

conclusion-bosimulator

In conclusion, I would like to thank the author of the development with a nickname MTH2014, who gave so useful and easy to use tool. Actually, the simulator can be used not only to check the ready strategies, but also to train your intuition, or just for the development of the trading process (the indicator can also be used on a regular chart in real-time).