Using Historical Prices
Currency prices are used to derive pip values, which in turn are a critical part of the equation for calculating position sizes.
The Forex Smart Tools Advanced Calculator normally uses today’s currency prices, which it pulls in from an active MT4 platform on your computer. A second option allows you to manually enter prices for each currency pair. But if you are backtesting a strategy from a few years back, the price of the currency pair you’re testing may be quite different from what it is today. This discrepancy will make position sizing very inaccurate.
The solution to this is to turn on the function within the Advanced Calculator to use the actual prices from the time you are testing. In this way your position sizing will be completely accurate for each trade you place in your testing.
1- Turn On FT pricing
The first step for enabling the use of historical prices is to go to the Settings menu of the Advanced Calculator and choose PRICE SOURCE.
If you don’t see either FT option available to choose (if they are greyed out), you will need to start a test actively running in the Forex Tester. Just set it on play mode with tick by tick play to get a stream of prices to initially come thru the link.
2 – Which Option To Choose
There are 2 choices for the price source: Play mode or manual candle advancement. The mechanics of the Forex Tester dictated that we could only pull price in one mode or the other, not both simultaneously, so think about which way you prefer testing.
If you like testing where you hit play and watch the movement of each candle forming – then stop it to place or manage trades – you should choose Play mode as your price choice within the Calculator.
Manual Candle Advancement
Many trades make their trade decisions based on closed candles. If that is your style of trading, then it is simpler to run a backtesting by advancing each complete candle. You can press the space bar on your keyboard to advance one candle at a time, or hold the space bar down and many candles will advance very quickly. You can also use the green candles at the top of the Tester menu bar to manually move candle by candle.
3 – Switching Modes
If you elect one mode of testing and then realize you’d rather be on the other mode, the Calculator will not happily jump from one to the other unless you go somewhere else first, so choose MT4 pricing from the Price Source settings – then choose the mode you want to use during your testing (play or manual advancement).
4 – Double Check First
Before you begin using the Calculator for position sizing, it’s always smart to see that your choice registered correctly. Set up the Forex Tester and the Calculator side by side on your monitor so you can watch both at the same time.
Within the Calculator, go to the Currency Rates tab. Now run the Tester a bit in the mode you chose (using the play button OR using the space bar). If everything is fine then you will occasionally see prices briefly highlight in yellow as they adjust on the Currency Rates tab. If you don’t see this as your Tester data unfolds, then try the tip mentioned in step 3 (Switching Modes) and re-check it.
5 – Supporting Currency Pairs
When you go to the Currency Rates tab of the Advanced Calculator you will only see the pairs matching the opened charts on the Forex Tester. All other currency pairs you may have brought over from an MT4 platform will temporarily be hidden.
You may see a red warning if you bring in a pair without its supporting currencies. To learn more about this, see this article. The easiest solution is to go back into your Forex Tester and start a new project which includes a chart for the support currency pair as well as the one you want to test.
As an example: say you want to test the GBPJPY. If that is the only pair you open a chart for on the Tester you will find that the Advanced Calculator warns you that it cannot compute pip values. You will have to also have a chart with the GBPUSD as well for pip values to be calculated too.