You have a trading plan and it may be something you developed on your own after working through the night with charts or it could be an improved version of something you learned from a forum or trading mentor. In any case, if you are considering trading with a prop firm or have already done so, you must thoroughly backtest it before putting your money at risk.
Fortunately for us, this process is easier than you could imagine due to MT5 (MetaTrader 5).
Here’s a detailed look at how to use MT5 for forex trading and backtest a trading strategy on MT5 that makes sense for trading prop firms. We’ll be straightforward and avoid the jargon.
Why Backtesting Is Non-Negotiable for Prop Traders
Before we dive into the nuts and bolts of backtesting, let’s clear something up. How to use MT5 for forex trading and why backtesting matters so much for prop traders.
Prop firms don’t mess around. They’re not handing out access to funded accounts so you can guess your way through the market. They want consistency. They want evidence. And they want you to prove that you can manage risk like a pro.
Backtesting is your proof of concept. It’s your chance to show:
- Your strategy actually works (on historical data, at least)
- You understand drawdowns, win rates, and risk-reward ratios
- You’re not just getting lucky—your method has structure and logic
Plus, if you can’t trust your strategy in the past, why on earth would you trust it with real capital today?
What You’ll Need Before You Start
Here’s what you’ll need:
- MT5 platform installed (desktop version is a must for serious backtesting)
- A strategy either manual rules or an Expert Advisor (EA)
- Historical data (we’ll show you how to download this properly)
- Time and patience. Seriously, don’t rush this.
If you’re trading for a prop firm, the odds are that they’ve already told you what instruments, timeframes, or rules to follow. Stick to those guidelines when you’re testing. No point in building a killer gold scalping strategy if your firm only allows EUR/USD.
Step 1: Launch the MT5 Strategy Tester
First things first: open MT5 and head to the Strategy Tester. You’ll find it in the bottom panel of the platform, or you can just hit Ctrl+R to pop it open.
This is where all the magic happens.
You’ll be looking at several key options:
- Expert: This is where you select your EA (if you’re using one)
- Symbol: Choose your trading pair or instrument
- Model: Choose how detailed you want the simulation to be
- Date Range: Pick the period you want to test
- Visual Mode: Tick this on if you want to watch the trades play out
If you’re manually testing a strategy (without an EA), you’ll want to use Visual Mode so you can enter trades by hand during the test.
Step 2: Load Up Quality Historical Data
MT5 doesn’t always come loaded with the best data by default. If you want accurate results, especially with scalping or short-term strategies, you need high-quality historical data.
Here’s how to get it:
- Head to Tools > Options > Charts
- Set the “Max bars in history” and “Max bars in chart” to something high (like 999999999)
- Then go to Tools > History Center
- Download the specific symbol and timeframe you want to test
Better data = better backtesting results. If your broker doesn’t offer solid historical data, consider using a third-party source like Dukascopy or Tickstory. Just make sure the data is in the right format for MT5.
Step 3: Pick Your Testing Model
Now, MT5 gives you a few testing models. Here’s the breakdown:
- Every Tick is based on Real Ticks: This is the most accurate but slowest
- Every Tick: Pretty accurate and a bit faster
- 1-Minute OHLC: Faster, but less precise
- Open Prices Only: This is the fastest option but not detailed enough for serious strategy testing
If you’re testing a scalping strategy or anything that relies on precision, go with “Every Tick Based on Real Ticks.” If it’s a swing trading strategy and you don’t need tick-by-tick precision, “Every Tick” might do the job without making your computer cry.
Step 4: Set Your Parameters
Before you hit “Start” and get all excited, check your strategy settings. If you’re using an EA, you can adjust inputs like:
- Lot size
- Stop loss and take profit
- Risk percentage
- Time filters
- Indicator settings
Tweak these according to your prop firm’s rules. Some prop firms have strict max drawdown limits or require minimum risk-reward ratios, so keep that in mind.
You can also run optimization here if you want MT5 to test different parameter combinations and find the best-performing one. But fair warning—optimization can sometimes lead to curve-fitting, so don’t blindly trust the results without understanding why they performed better.
Step 5: Run the Backtest
If you’ve enabled Visual Mode, you’ll see the chart start ticking forward. This is super useful for manual strategies or just for watching how your EA behaves in real time.
Watch for things like:
- How often are trades taken
- How the drawdowns behave
- If the strategy handles choppy vs trending markets differently
- How long trades last on average
Let it run through your chosen date range, and then you’ll get your results.
