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Old 10-27-2006, 11:23 AM
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Join Date: Dec 2005
Posts: 11
onelesstick is on a distinguished road
Question for programmers

I am new to automated trading so I apologise in advance if this is a stupid question. I have been reading the various threads and systems on this site and have noticed that a lot of systems and ea's are based on break-out strategies of one sort or another. They are then backtested via MetaTrader to assess their degrees of success. What I can't understand is as all backtesting is done against MetaTrader charts - which are based on the bid price - can these backtests be accurate.
The reason I question this is because although the sell price, on a breakout, would be accurate the buy stop price would be entered early by the spread distance. Also on closing a short position the buy limit price would be filled early by the spread amount. A difference of 3 - 5 pips on average.
The question to the programmers is this. Is it possible to create, within the input variables, a spread compensation factor so the indicator would show correct entries for selling on the bid and buying on the ask ?
Or am I totally wrong and, for some reason, there is no need to take this into account ?
For your kind assistance I thank you.
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Old 10-27-2006, 12:29 PM
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Join Date: Mar 2006
Posts: 787
Maji is on a distinguished road
Quote:
Originally Posted by onelesstick
I am new to automated trading so I apologise in advance if this is a stupid question. I have been reading the various threads and systems on this site and have noticed that a lot of systems and ea's are based on break-out strategies of one sort or another. They are then backtested via MetaTrader to assess their degrees of success. What I can't understand is as all backtesting is done against MetaTrader charts - which are based on the bid price - can these backtests be accurate.
The reason I question this is because although the sell price, on a breakout, would be accurate the buy stop price would be entered early by the spread distance. Also on closing a short position the buy limit price would be filled early by the spread amount. A difference of 3 - 5 pips on average.
The question to the programmers is this. Is it possible to create, within the input variables, a spread compensation factor so the indicator would show correct entries for selling on the bid and buying on the ask ?
Or am I totally wrong and, for some reason, there is no need to take this into account ?
For your kind assistance I thank you.
Yes, you can program your systems to buy at the Ask and sell at the Bid.
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Old 10-27-2006, 08:09 PM
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Join Date: Dec 2005
Posts: 11
onelesstick is on a distinguished road
Thanks Maji -

I know nothing about programming but your saying it's possible gave me the encouragement to try. I was able to modify the indicator I'm trying out to show entry levels which I can now place manually without having to remember to add the spread. I have to modify and save the indicator for each pair but that's not a problem. Have set up a demo account with Apari U.K. and don't know how their spreads will vary at news times but for normal trading this will be O.K.
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