These articles, on the other hand, discuss currency trading as buying and selling currency on the foreign exchange (or "Forex") market with the intent to make money, often called "speculative forex trading". XE does not offer speculative forex trading, nor do we recommend any firms that offer this service. These articles are provided for general information only.

Unit Tests for Position/Portfolio - While I've not mentioned it directly in diary entries #1 and #2, I've actually been writing some unit tests for the Portfolio and Position objects. Since these are so crucial to the calculations of the strategy, one must be extremely confident that they perform as expected. An additional benefit of such tests is that they allow the underlying calculation to be modified, such that if all tests still pass, we can be confident that the overall system will continue to behave as expected.

The "philosophy" of the forex trading system, as with the rest of the QuantStart site, is to try and mimic real-life trading as much as possible in our backtesting. This means including the details that are often excluded from more "research oriented" backtesting situations. Latency, server outages, automation, monitoring, realistic transaction costs will all be included within the models to give us a good idea of how well a strategy is likely to perform.


There is one unpleasant fact for you to take into consideration about the margin call Forex. You might not even receive the margin call before your positions are liquidated. If the money in your account falls under the margin requirements, your broker will close some or all positions, as we have specified earlier in this article. This can actually help prevent your account from falling into a negative balance.
For securities, the definition of margin includes three important concepts: the Margin Loan, the Margin Deposit and the Margin Requirement. The Margin Loan is the amount of money that an investor borrows from his broker to buy securities. The Margin Deposit is the amount of equity contributed by the investor toward the purchase of securities in a margin account. The Margin Requirement is the minimum amount that a customer must deposit and it is commonly expressed as a percent of the current market value. The Margin Deposit can be greater than or equal to the Margin Requirement. We can express this as an equation:
Margins are a hotly debated topic. Some traders argue that too much margin is very dangerous, however it all depends on trading style and the amount of trading experience one has. If you are going to trade on a margin account, it is important that you know what your broker's policies are on margin accounts, and that you fully understand and are comfortable with the risks involved. Be careful to avoid a Forex margin call.
In particular I've made the interface for beginning a new backtest a lot simpler by encapsulating a lot of the "boilerplate" code into a new Backtest class. I've also modified the system to be fully workable with multiple currency pairs. In this article I'll describe the new interface and show the usual Moving Average Crossover example on both GBP/USD and EUR/USD.
In particular I've made the interface for beginning a new backtest a lot simpler by encapsulating a lot of the "boilerplate" code into a new Backtest class. I've also modified the system to be fully workable with multiple currency pairs. In this article I'll describe the new interface and show the usual Moving Average Crossover example on both GBP/USD and EUR/USD.

In order to understand Forex trading better, one should know all they can about margins. Forex margin level is another important concept that you need to understand. The Forex margin level is the percentage value based on the amount of accessible usable margin versus used margin. In other words, it is the ratio of equity to margin, and is calculated in the following way:
Local Portfolio Handling - In my opinion carrying out a backtest that inflates strategy performance due to unrealistic assumptions is annoying at best and extremely unprofitable at worst! Introducing a local portfolio object that replicates the OANDA calculations means that we can check our internal calculations while carrying out practice trading, which gives us greater confidence when we later use this same portfolio object for backtesting on historical data.
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