When you first start trading, it’s always exciting to get involved in the live markets. You want to see what’s happening in real-time and react to the twists and turns of the price movements at the same time as countless other traders around the world.
However, while you’re in your development phase, live trading is often not the best thing to be focusing on. Instead, we can achieve many of our goals much more effectively and efficiently by using historical data.
Of course, the live markets can’t be entirely replaced in your development. You will need them for experiencing the emotional, mental and physiological shifts that happen when you’re trading. Although some methods of using past price movements can replicate the challenges of trading psychology to an extent, it will never be exactly the same.
But, as you work your way through our free mini-series, you’ll come across many ways historical data will help you reach your goals. For example, it can be used for:
- Deliberate practise
- Gaining experience by dealing with more scenarios
- Building your trading system
- Back-testing your system and strategies
- Collecting more data for optimisation and calibration
These are things that can be done in the live markets, but using historical data has some clear advantages, such as:
- Having access to more data rather than being restricted to what’s happening now.
- Being able to look at different market dynamics, rather than just the current cycle.
- The ability to skip past irrelevant, unimportant or slow periods in the markets.
- The option of slowing things down to deliberate over decisions or analyse scenarios.
With that in mind, I wanted to share a few options for how you can do that. We will start with a free option and then go through two paid options. The paid options are much more convenient and effective, but it’s good to have some choice!
The Manual Option (All Charting Platforms)
This first option sounds like the most clunky, inefficient and unsexy option out of the three we’ll be going through, but it’s actually the one most commonly used and one that I used for many years.
This approach should work on all charting platforms, but we will focus on Metatrader 5 since it is one of the most popular platforms, fairly straightforward and available at no cost.
Step 1: Turn off Auto Scroll and Chart Shift
The first thing you will need to do is turn off Auto Scroll and Chart Shift, like in the screenshot below. By doing this, we can move back on the chart to previous data without the platform automatically bringing us back to the most recent price when there is a new tick.
Step 2: Find an Appropriate Time/Date on the Chart
We now need to find a point on the chart that we want to analyse. For this we can either scroll back using our mouse, or you can press the ‘space’ key and a box will appear (as shown in the screenshot below) where you can enter an exact date you want to move to.
Step 3: Replicating the Live Markets
For some activities you will want to stop yourself from seeing what happens next on the charts so you can avoid making decisions based on hindsight. For this, you can use the ‘F12’ key to move along one bar at a time. If you want to move along quicker you can use the right arrow.
Step 4: Using Multiple Time Frames
This step is where MT5 lets us down. As you switch time frames, you will often lose the place you are looking at on the chart and it can take some time to find the point you were analysing. A work-around for this is to draw objects on the chart that will appear on multiple time frames and point out where you should be looking on the chart.
For example, if you use a vertical line and a horizontal line, when you change between time frames you will be able to quickly find the exact point you need to pay attention to.
There is also an automated strategy tester available in Metatrader, but this is not appropriate for manual trading and is more focused on automated trading systems. That feature makes Metatrader a very useful platform if you are developing that type of trading, but that’s not the focus of this article.
- Low cost
- No need to learn to use something new
- Quick and easy to do
- Doesn’t closely replicate live markets as you only see the closed candles
- Trade information will need to be noted manually
- Changing time frames can be inefficient
- High risk of making decisions in hindsight
Replay Function (TradingView)
This next feature is most easily available in the TradingView platform, although it is likely to feature in other charting platforms as well. It’s their replay feature.
The replay feature allows you to pick a past price point on the chart and remove any future data from that point onwards. This means, you can observe the chart as if it was at that point in time, without the influence of what happened next leading you to any hindsight bias.
You can then move along one bar at a time or set it to automatically move along for you at your chosen pace. This means you can set time pressure to your decisions if you choose to and more closely replicate real market conditions than with the manual option discussed above.
Unfortunately, this feature in TradingView is restricted to their premium paid version, so it will cost money if you want to use it in full. With the free version, traders can use this feature on the daily time frame and above, rather than being able to switch between many different time frames, which is likely to be needed.
There is also the downside that it doesn’t entirely replicate the live markets, as you are not dealing with every tick the price makes. However, this is unlikely to cause any problems for many of the tasks we would be using past data for, as outlined at the start of the article.
Despite these negative aspects, when we asked our Duomo Method members which platforms they used, there were some fans of the TradingView replay feature.
“The only thing I have used is the replay feature on TradingView which allows you to move through the charts bar by bar, pretty good for backtesting etc.”
- Easy to use
- Avoids hindsight bias
- Can create time pressure like in the live markets
- The full version comes at a cost (although not a high one)
- Doesn’t exactly replicate real-time market conditions
- Trade information will need to be collected manually
Trading Simulators (Metatrader 4)
There are many trading simulators available, but we focused on the ones that are available for Metatrader. The one most commonly used by our members is called Soft4FX and it integrates with Metatrader 4.
A simulator recreates a live trading experience from a point in time that you choose. However, you also have the option to slow the movements down, speed them up or to pause the movements. This gives you a lot more flexibility in what you can do.
The great thing about a trading simulator is that it will record your trade information for you. So you can trade the markets as if it was real-time, including making decisions like scaling in and out, setting a stop loss and take profit level, and much more. It means you can see after a trading session how you have performed in terms of P&L.
Although you won’t encounter the exact same psychological obstacles you might find in the live markets, by creating a live experience it does get you as close as possible to that while using past data.
This is easily the preferred option for using past data to improve your trading, however the cost is also higher than with the other options we have discussed. Some of our members have chosen to invest in the platform and have had some good things to say about it:
Adam, a Duomo Method member, says:
“I’ve only used Soft4FX, still fairly new with it as I only got it the back end of last year. Suggested by other members (which is always the best way).
Anyway, with my limited experience with it thus far it certainly does everything I need. Simulate a trade how you normally would using MetaTrader (because that’s the software I use), use all the functions like scaling out, moving Stop/Take profit levels and you can save all the data as you wish.”
Darren, another Duomo Method member, said:
“I have just started using soft FX simulator which seems very good so far with news calendar as part of it”
If you want to know how to use a trading simulator platform, you can check out an example in the video below. It shows a live stream session we had on Facebook, where people were able to follow along and help make decisions about the trade. It led to a very successful trade and a great learning experience for all involved.
- Closely replicates a live market experience
- Collects trade data so you can monitor your performance
- You can control the pace of the price movements to suit your needs
- Comes at a much higher price than alternatives
- It requires a bit of learning to become familiar with the software
- Takes a bit more time to set up a session and get started