It's like entering a Formula 1 race without having seen the track before if you trade without backtesting. You can make it through one or two laps but eventually you'll run against a wall you were unaware existed.
The stakes are significantly higher when a prop firm is involved. You are managing someone else's money and their expectations are quite high, so you aren't simply messing about with your own. It is therefore imperative that you learn how to backtest your trading techniques on MetaTrader 5 (MT5). It is definitely necessary.
Now let's speak about MT5 backtesting, including why it's important, how to perform it correctly, and how to utilize it to improve your strategy.
Why Backtesting Even Matters (Especially in Prop Trading)
Applying a trading technique to historical data to determine how it would have fared is known as backtesting. You can think of it as your trading time machine. Backtesting allows you to obtain years' worth of findings in a matter of minutes or hours, as opposed to forward-testing, which requires effort and actual money.
When trading for a prop business, your goal is to continuously make money while adhering to regulations such as minimum trading days, maximum losses, and daily drawdowns. You cannot afford to make a mistake.
Backtesting allows you to:
- Test and tweak strategies without risking capital
- Eliminate setups that only look good in theory
- Understand how your strategy behaves during market chaos (think COVID crash or interest rate hikes)
- Prove consistency—an absolute must for passing a prop firm challenge
Why Use MetaTrader 5 for Backtesting?
You’ve probably already heard that the MT5 trading platform is praised for its slick interface, multi-asset support, and improved coding environment over its older sibling, MT4. But when it comes to backtesting, MT5 is a serious powerhouse.
Multi-threaded Strategy Tester
Unlike MT4 which runs tests on a single thread, MT5 uses all your CPU cores. Translation? You get much faster results.
More Accurate Historical Data
MT5 lets you test strategies on tick data with actual spreads. That means your results are way closer to real trading conditions.
Built-in Optimization Tools
MT5 doesn't just let you run a test. You can tweak input variables to find the sweet spot—whether that's your take-profit levels, moving average periods, or whatever else you’re using.
Support for Forward Testing
MT5 lets you split historical data into training and testing periods. That way, you can make sure your strategy isn't just overfitted to one specific time frame.
Step-by-Step: How to Backtest in MT5 Like a Pro
Step 1: Open the Strategy Tester
Head over to the View tab in MT5 and click on Strategy Tester. You can also just hit Ctrl+R.
Once it's open, you’ll see several settings. Don’t get overwhelmed—each one serves a purpose.
Step 2: Choose Your Expert Advisor (EA)
If you’ve already coded your trading strategy as an EA (Expert Advisor) then it's great. If not then you’ll need to write one in MQL5.
Not a coder? There are tools like EA builders online or you can hire a freelancer to convert your rules into code. Just make sure the EA reflects your actual strategy logic—no shortcuts.
Step 3: Set the Symbol and Timeframe
Pick the instrument you want to test (EUR/USD, S&P 500 futures, whatever you're trading at your prop firm). Then choose the timeframe your strategy operates on.
Important tip: If you're testing something like scalping, use M1 (1-minute) data for the most accurate results.
Step 4: Choose the Testing Model
MT5 offers three main testing models:
- Every tick based on real ticks – Most accurate (and slowest)
- Every tick – Less precise, but faster
- Open prices only – Fastest, but only good for strategies that open trades at bar open
Stick with real ticks if you care about accuracy (and you should).
Step 5: Adjust Your Testing Period
You can select specific start and end dates. Try backtesting over several years, especially through volatile periods. You want to see how your strategy holds up during market booms and crashes.
Also, don’t just cherry-pick easy years. Test the tough ones like 2020 or 2022 to see if your strategy can weather the storm.
Step 6: Add Deposit and Leverage Info
Set this to match the conditions you'd get in your funded account. If they give you $100,000 with 1:30 leverage, input those numbers.
Why? Because a strategy that works on a $10k account with 1:500 leverage might not fly under prop firm rules.
Step 7: Enable Visualization (Optional)
You can turn this on to watch your trades being executed in real-time on the chart. It's slower, but super helpful if you're trying to troubleshoot or understand your strategy’s logic.
Step 8: Hit Start and Let It Run
Grab a coffee or three depending on how heavy the test is.
Once it’s done, you’ll see a report with all the juicy data you need.