Backtesting
Definition
Backtesting is the process of testing a trading strategy against historical market data to evaluate its performance. MetaTrader 5's Strategy Tester allows traders to backtest Expert Advisors across multiple timeframes and symbols with configurable parameters. Key metrics include net profit, drawdown, profit factor, and Sharpe ratio. Backtesting helps validate strategies before risking real capital.
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MetaTrader 5 (MT5)
MetaTrader 5 is a multi-asset trading platform developed by MetaQuotes Software for trading forex, stocks, futures, and CFDs. It offers advanced charting tools, technical indicators, algorithmic trading through Expert Advisors (EAs), strategy testing, and depth of market. MT5 is the successor to MT4, offering additional timeframes, order types, and an integrated economic calendar.
MT5
MT5 is the commonly used abbreviation for MetaTrader 5, the advanced multi-asset trading platform by MetaQuotes. Compared to its predecessor MT4, MT5 offers more timeframes (21 vs 9), more order types (6 vs 4), a built-in economic calendar, depth of market, and netting position accounting in addition to hedging mode. MT5 uses the MQL5 programming language for custom indicators and Expert Advisors.
Expert Advisor (EA)
An Expert Advisor is an automated trading program that runs on the MetaTrader platform. EAs execute trades based on predefined rules and algorithms without manual intervention. They can monitor markets 24/7, execute complex strategies, manage multiple positions, and eliminate emotional decision-making. EAs are written in MQL5 for MetaTrader 5 and can be optimized using the built-in strategy tester.
EA
EA is the abbreviation for Expert Advisor, an automated trading robot that operates on the MetaTrader platform. EAs analyze market conditions using technical indicators and custom logic, then execute trades automatically based on their programming. They range from simple scripts that manage a single strategy to complex systems handling multiple instruments and risk management rules simultaneously.
MQL5
MQL5 (MetaQuotes Language 5) is the programming language used to develop Expert Advisors, custom indicators, scripts, and libraries for MetaTrader 5. Based on C++, it offers object-oriented programming, OpenCL support for GPU computing, and access to the MQL5 community marketplace. MQL5 provides comprehensive functions for market analysis, trade execution, and data visualization.
Forward Testing
Forward testing (also called paper trading or walk-forward testing) is the process of evaluating a trading strategy on live or simulated market data in real time, after it has passed backtesting. It validates that backtested results hold up under current market conditions. Demo accounts are commonly used for forward testing, providing risk-free validation before committing real capital.
Demo Account
A demo account is a simulated trading account that uses virtual money to replicate real market conditions. It allows traders to practice strategies, learn the platform, and test Expert Advisors without risking real capital. Demo accounts provide access to real-time price data and full platform functionality. They are essential for beginners and for testing new strategies before live deployment.
Live Account
A live account (also called a real or funded account) is a trading account where real money is deposited and actual trades are executed in the financial markets. Unlike demo accounts, live accounts involve real financial risk and real emotions. The transition from demo to live trading is a critical step that requires adequate preparation, a tested strategy, and proper risk management.
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