Does anyone know how to set multicharts up to backtest currencies properly?
If I load USDJPY for example I get 85 on my right hand Y-axis of my chart. So when I put buy $100,000 in [Strategy > Properties] it thinks the asset is worth $85 and then buys 1170 units or thereabouts. If the Yen decreases in value to 90 then the strategy buys fewer units because it see's the 90 as $90 and only now will buy 1110 units.
Does anyone know how to accurately backtest currencies? What settings or other solutions are available? Any suggestions?
While we're waiting for someone with actual MC FX experience to comment can you let us know
1. whether your broker expects orders in lots, units or $$$ (e.g., IB expects orders in account currency [the currency of the country you've identified as your home for one reason or another], from which it calculates an FX position in the selected currency pair and states your holdings in +/- base/quote currencies), whereas in my experience a lot of brokers specializing in FX expect order quantities in lots (or micro lots). As an aside, if not ticks then MC seems to indicate P&L in the chart trading panel either in account currency for some pairs (e.g., USD.JPY) and quote currency for others (e.g., GBP.EUR) and quote currency (2nd in the pair) in performance reports. Drives me nuts.
2. most important, how your strategy calculates the position size for orders. That is, does it use built-in MC position or portfolio profit keywords or does it do its own accounting?
Such a thing would help, yes. But you'll also need to keep track of your account since the profit/loss results are not converted back to the base currency when backtesting in MultiCharts. This also means that the Performance Report can't be used/trusted and that all PowerLanguage reserved words that refer back to (something related to) account values are incorrect.
Which is quite a pain, since you then have to manually code this or track this in another program (like Market System Analyzer).
I use MC and IB and was back testing last night on the eur/usd. Im in Australia so neither are my normal currency. I just use a lot size of 100,000 on the trades because I know this =$10 /pip and is about the position size (read dollar amount) I can handle. So for pairs like usd/jpy I would use a smaller lot size ie 1000.
I dont treat it the same as share trading where I have a $100,000 that I will split into 10 lots and use a 2% risk model etc etc.