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Expert Advisor (EA) Trading Terminology Cheat Sheet｜Backtesting, Optimization, Slippage, and What is VPS?

Beginners using EA always find professional terms hard to understand? This tutorial uses simple and plain language to explain the meanings and uses of Backtesting, Optimization, Slippage, and VPS, helping you quickly grasp the core concepts and key terminology of EA automated trading.
  • This website uses AI-assisted translation. If you have any feedback or suggestions, feel free to contact us. We look forward to receiving your valuable feedback! [email protected]
This website uses AI-assisted translation. If you have any feedback or suggestions, feel free to contact us. We look forward to receiving your valuable feedback! [email protected]

Explanation of Common Terms Related to Expert Advisor (EA) 

When learning and using Expert Advisor (EA), you may encounter some professional-sounding terms.
Don’t worry, these terms are not difficult to understand. Understanding their meanings can help you use EA better.
Below is a simple explanation of several common terms: 

1. Backtesting 

  • What is it? Testing your EA strategy using historical market data.
  • Why do it? Like taking a "historical simulation test" to see if your strategy would have made a profit or loss in the past.
  • What to watch out for? Past performance does not guarantee future results; the market always changes.

2. Optimization 

  • What is it? Adjusting various EA setting parameters to find the best combination.
  • Why do it? To make the EA perform best on historical data (maximizing profit or minimizing risk).
  • What to watch out for? Beware of "over-optimization," which can make the EA too perfect for past data but unable to adapt to real markets.

3. Slippage 

  • What is it? The difference between the expected execution price and the actual execution price.
  • Why does it happen? Caused by rapid price changes or insufficient market liquidity.
  • Is it good or bad? There can be positive slippage (better execution price) and negative slippage (worse execution price).
  • Can EA avoid it? It cannot be completely avoided; EA will also encounter slippage.

4. Virtual Private Server (VPS) 

  • What is it? A remote computer that can operate 24 hours a day.
  • Why does EA need it? To ensure MT4/MT5 runs continuously even if your local computer is turned off.
  • Benefits of using VPS? Ensures EA runs uninterrupted and stably.
  • Is there a cost? Usually rented monthly.

Simple Summary 

Term  Simple Explanation  Why Important for EA Users? 
Backtesting  Testing strategy with historical data to see past performance. Evaluate strategy quality and risk before using real money.
Optimization  Adjust EA settings to find the best performing combination on past data. May improve performance but be careful not to over-optimize.
Slippage  Difference between actual and expected execution price. Affects real profit and loss, especially during high market volatility.
VPS  A continuously running remote computer used to run your trading platform and EA. Ensures EA runs 24/7 without interruption, unaffected by your local computer.
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Notice: This website uses AI-assisted translation. If you have any feedback or suggestions, feel free to contact us. We look forward to receiving your valuable feedback! [email protected]