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Metastock incorporates two additional functions – metastock systems tester and explorer.
Let’s look at Metastock system tester.
You can see that we are given a list of trading systems to work with. The Metastock systems tester allows us to see how certain systems work with various securities.
Remember that all indicators in corporate time periods and no one time period is the correct one. In order to find the best time period used with the particular security some of these tests incorporate optimization.
You will see such MACD with optimizations.
Well, select it click add it and you will see that we have notes buys, sells and MACD goes above or below its tricker.
Select optimize to specify the time period in the tricker.
Down below that we see the parameters used for entering long, closing long, entering short and closing short positions.
Let’s look at enter long.
In this line it tells us the following conditions must be met. The MACD must be higher that the exponential moving average as calculated on the MACD.
In the space where specified the time period would be we can see OPT1.
This is a variable rather than s specific number. You can click on optimize and find out what this variable represents.
Down and click optimize and click add it.
We can see that the minimum time period is 4 days.
The max is 20 and the step is 2.
This means that the test will start with 4 day time periods then 6, then 8 etc. up to 20 day time periods.
So, let’s apply this to S&P 500 Index chart.
Choose MACD with optimization.
We go down and we click start.
Makes its calculations we are gonna click on reports and take a look at exactly of what would happen to you.
We can see that 9 tests were performed. And when using this system three were only negative results, or negative profits.
We were shown that total number of trades for each test, the number that won and the number of lost.
As well as the percentage gained from our initial investment.
In this case there is no gain.
Here is the column for total trades.
In the next store you can see total wins, total losses and their average.
We can also see that the best results were gained by using 18 day time period and again here is the percentage gained which negative 19%.
Let’s close that and see if we can find one or we will make some profit.
Let’s select RSI with optimization.
Go through the same process we select it click test and it runs through its calculations.
Click reports and here we can see some much better results.
The report shows us that the most profitable time period was 24 days. And it gave us a 71% return on our investment. Whatever that might have been.
There were total of 2 trades, 2 winds and no losses.
And we can see that the worst time period to use was 15 days.
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