Best Backtesting Software for Developing Strategies for Stocks, Futures and Forex

The Great Depression, the Global Financial Crisis, the Flash Crash of 2010 – the history is full of examples of turbulent stock market developments that have put traders to the test. Traders who haven’t been around at the time probably wonder how their strategies might have performed when things had gone south.

Thanks to technology, nowadays, you can backtest your trading strategy to find out how it would have fared under various stock market scenarios. As a result, backtesting has become an essential tool in the arsenal of every portfolio manager who wants to be successful – for beginner traders, expert advisors and institutions.

The following guide summarizes the results from hours of research to give you the top 10 best backtesting software for analyzing trade ideas. It covers anything from free and paid solutions to backtesting software for beginners and complex and powerful strategy tester programs for the more demanding ones. Now, let’s find out which alternative will suit you best!

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Best Backtesting Software: Top 10

To save you time of analyzing dozens of backtesting software solutions, I’ve compiled a list of the 10 best backtesting software programs of the year. The strategy tester solutions featured in this list are picked based on several key factors, including features and advanced capabilities, UI and UX, cost, suitability, and more. Let’s dive in:

1. TradeIdeas: The Most Advanced AI-Powered Backtesting Software

trade ideas

Considering that AI is becoming a dominant trend in financial markets, Trade Ideas is the perfect backtesting software to help you capitalize on its potential.

The stock analysis software provides fully automated backtesting features that allow you to go back in time and see how particular trade ideas would have fared under different scenarios.

The backtesting functionality is called OddsMaker and is integrated as a separate module within the Trade-Ideas stock scanner. It is included in the Trade Ideas Premium subscription and can be purchased separately.

Currently, it is the best “event-based” backtesting of stock alerts available in the market. Combining the stock scanner and the backtesting software guarantees real-time market analysis and high-profit potential trade ideas identification. That way, the trader can see what would have happened if he had placed a trade when the opportunity first appeared.

The backtesting feature is very user-friendly and doesn’t require any scripting or programming skills.

The backtesting software solution can also be complemented by the integrated AI trading algorithms. Trade Ideas Pro generates entry and exit signals and allows for detailed information on the backtested performance for the particular trade.

The trader can even leave the software to do the trading autonomously based on pre-defined parameters via the brokerage API. What is more important, the AI algorithms have consistently beaten the market over the years. Some algorithms run thousands of backtests per day to filter only the strategies with the highest win rate and apply those filters throughout the next trading day.

Best Trade Ideas Offers: Discount for new subscribers, trading room, newsletter


2. TradeStation: The Best Free Broker-Connected Solution

tradestation

TradeStation is known mainly for being a leading day trading brokerage house with commission-free trading. You can trade stocks, ETFs, futures contracts, options, cryptocurrencies, mutual funds, and more. However, what often flies under the radar is the number of advanced functionalities of its high-end TradeStation desktop platform.

The desktop platform has various features, including

  • RadarScreen (continuous monitoring and ranking of over 1,000 financial instruments),
  • EasyLanguage (proprietary beginner-friendly programming language for coding customized strategies),
  • The Matrix (a detailed market depth window, a highly advanced order-entry tool, and a precise order-tracking system),
  • TradingApp Store (choose from dozen built-in trading apps),
  • OptionStation Pro (options analysis software),
  • Simulated Trading Mode (a demo trading feature), and our primary point of interest
  • Stock Trading App for iOS and Android
  • And extensive backtesting functionalities.

You can backtest, optimize, and fully automate your trading plan across various stocks and futures instruments through TradeStation. In addition, the platform is filled with decades of historical market data, which means you can build well-informed models.

The combination of the simulated trading functionality and the backtesting features prove perfect prerequisites to build, test, and improve your trading strategy in real-time without putting capital at risk.

That way, you have the comfort to take all the time needed to build up your confidence and improve the performance of your strategy before applying it to the real world.

Best TradeStation Offer: Use TradeStation for free by opening an account now


3. TrendSpider: The Most Beginner-Friendly Backtesting Software for EOD Trading Systems

trendspider

TrendSpider is another backtesting software solution worth a shout. The fact that it is the most convenient choice for the beginner or intermediate trader doesn’t mean it lacks features. Just the opposite, the software shines on the UI and capabilities fronts equally.

TrendSpider’s users can rely on over 20 years of historical data on the daily time frame and extensive intraday data to feed into the backtested strategies. That way, the trader can guarantee the higher accuracy of his models and avoid strategies that would have underperformed when trading on real-time data.

In addition, the backtesting features are suitable for long and short strategies and can apply realistic trade-by rules to mimic the real-life trading experience fully.

The backtesting tool is chart-based (from 1-minute to monthly), meaning you can easily create technical buy and sell rules even without knowing how to write a single line of code. For example, you can combine different indicators, price action trading signals, portfolio chart patterns, volume and more to build custom strategies from scratch.

The fact that the backtesting features are 100%-based on a visual interface means TrendSpider is a great choice even for beginners.

The backtesting results are also presented in charts, making it easier to distinguish the top and bottom performers and additional crucial information like automated trendlines, win-rate, profitability, and drawdown. That way, the trader can quickly identify the trade ideas with enormous potential and where further tweaking might be needed.

The platform is web-based, and you won’t have to deal with any local installations.

Best TrendSpider Offer: Free 14-day trial, 15% discount with promo code DTDZ15 on any subscription


4. TradingView: The Best Free Backtesting Software

tradingview

TradingView enjoys close to 200 million monthly visits and, over time, has managed to establish itself as one of the most notable trading social communities worldwide.

Despite being free, TradingView grants access to various charting and screening features that can be applied on instruments traded on virtually all stock exchanges globally. Furthermore, TradingView offers an intelligent backtesting software solution powered by global market access and various assets (stocks, foreign exchange, crypto, and more) and trading indicators.

The platform is packed with a selection of backtesting scripts and strategies. However, bear in mind that, while many of them are free, if you want access to sophisticated strategies, you need to purchase them.

Among the top benefits of TradingView’s backtesting solution is its intuitive design. The results reporting is excellent as you can see details like the profit performance of the strategy (net profit, drawdown, profitable trades), the number of trades executed, and more. For more intuitive visual reference, the trades are plotted on a chart.

If you intend to use TradingView for more advanced backtesting and trading analysis, it is advisable to opt-in for the Pro and Pro Plus plans. The reason is that they unlock a universe of charts, indicators, and trading signals, as well as unrivaled customer support quality and access to intraday real-time data on virtually all assets.

One of the best things about TradingView’s backtesting feature is that over 2,000,000 users continuously share ideas and strategies that you can use for free or buy. Furthermore, the fact that the whole community is united around the idea of working towards a more profitable trading performance means you can collectively raise your game.

Best TradingView Offer: Use the 30-day free trial and receive a discount offer during the free trial period.


5. MetaStock: The Best Software for Backtesting and Forecasting Combined

metastock

MetaStock is an independent, broker-agnostic platform that does a great job in combining advanced scanning, backtesting, and forecasting features.

The platform allows you to backtest your strategies on a single instrument and entire markets. It also brings the opportunity to choose from ready-made backtesting scenarios or even develop and test your own sophisticated trading systems. But don’t get too excited. The truth is, if you want to design complex backtesting models, you will need some basic coding skills.

Traders also enjoy MetaStock because it visualizes the backtesting results in an easy-to-comprehend way. The platform generates lists of the buy or sell trading signals and allows you to deep-dive into each of them. This way, you can explore additional details like the size of the trade, its duration, PnL, and more.

Another feature that many traders choose MetaStock for is the forecasting tool. Blending statistics and mathematics plots an easy-to-read probability cloud that helps you set profit targets and stops more precisely. Together with the backtesting feature, they can prove the optimal solution to capitalize on reactive and proactive data.

MetaStock’s interface is beginner-friendly, although it won’t be harsh if we say that it is highly legacy-looking. However, if you are firm on the aesthetics of the software you use, there simply is much better backtesting software.


6. NinjaTrader: The Best Free Backtesting Software for Futures Traders

ninjatrader

NinjaTrader is a trade simulation platform with advanced charting, backtesting functionalities based on the C# programming language.

The platform focuses primarily on futures trading and is a great way to prepare for the live markets with simulated trading experience and professional market data.

In terms of functionalities, NinjaTrader is among the best backtesting solutions in the industry. The platform’s users can take advantage of an extensive collection of historical feeds, advanced charts and analysis features, hundreds of indicators, and thousands of third-party apps and add-ons for further customization.

The team behind the platform has ensured unlimited support and a continuous supply of investment advice and daily training webinars.

The built-in simulated trading mode is another integral ingredient in building a well-performing trading strategy on Ninja Trader. The combination of the simulation features and the backtesting capabilities gives you access to a high-performance engine that allows you to address all weak points on the training ground entirely for free.

The platform is enjoyed by both – beginner and advanced futures traders and is among the best backtesting software solutions on the market. If you decide to go with it, you simply won’t be disappointed.

The downside is that connecting a brokerage account requires a paid NinjaTrader license.


7. Interactive Brokers: The Best Fundamental Backtesting Software with Direct Market Access

interactive brokers

As one of the top brokerage companies, Interactive Brokers shines with its good reputation and competitive rates. The company was one of the first to pioneer the discount brokerage business model, which earned it the trust of a big part of the market.

Interactive Brokers account holders can engage in stocks, bonds, ETFs, futures, options, mutual funds, and forex trading, virtually the whole investment universe.

The platform comes with an extensive set of over 30 advanced trading tools designed to satisfy the needs of all market participants. Interactive Brokers’ fundamental backtesting system is a part of the advanced Portfolio Builder functionality. As its name suggests, it gives traders everything they need to design an investment strategy and test its performance based on fundamental data, not technical analysis.

The Interactive Brokers portfolio building and backtesting features are backed by top-tier research and fundamentals data, including rankings from top buy-side providers, analysts, real-time data and news streaming, stock reports, and more.

The feature is very intuitive. As soon as you are satisfied with the strategy’s performance during the backtesting phase, you can place live trades with just a few clicks, thanks to the built-in direct market access.

While the platform is free to download and install, backtesting through the Portfolio Builder is available only to active IB users.

Considering that IB’s offering comes with an unrivaled collection of research and analysis data entirely for free, it automatically becomes one of the top choices to consider.


8. MetaTrader 5: Advanced Forex Backtesting and Popular Trading Software

metatrader 5

Being the most popular forex trading platform globally naturally raises the expectations for the backtesting feature of the Meta Trader 5. It is safe to say that, apart from some minor drawbacks like the old-school UI, it doesn’t disappoint.

Meta Trader’s Trading Strategy Tester functionality allows users to perform backtests and optimize their trading systems before going live. In addition, meta Trader 5 is a forex backtesting software that allows you to use trading robots known as “Expert Advisors.”

The MetaTrader 5 Strategy Tester allows automated trading system testing for those engaged in foreign exchange trading activities. The feature is capable of solving heavy computational and mathematical problems. There are different testing modes where you can use historical data feeds, parameter optimization models, and more.

The generated results are visualized nicely with graphs, charts, and 3D models, similar to those developed in data analysis software like R and Python.

With that said, the Meta Trader 5 strategy testing functionality might not be the most convenient choice for beginners looking for an easy-to-navigate forex backtesting software. But that depends on your coding knowledge. The platform is very powerful and has various advanced functionalities that might appear too intimidating for first-time traders.

However, it is probably one of the best solutions for those looking for a highly sophisticated historical backtesting system. And best of all, MT5 allows for algorithmic and automated execution, giving you all the freedom you need.


9. MATLAB: The Best Backtesting Solution for Traders and Portfolio Managers with Programming Skills

mathlab backtesting engine

MATLAB is used by code-savvy traders who want to build their own trading algorithms from scratch. It is a popular choice among sophisticated groups like scalpers, high-frequency traders, and more.

If you have the programming skills, the potential with MATLAB is limitless. You can build powerful autonomous trading strategies, deploy computationally-heavy mathematical models, identify and exploit market opportunities through algorithmic trading, and more.

Backtesting is an essential ingredient in the auto trading strategies programmed in MATLAB. Before application, all trading models are tested to ensure their maximum efficiency. MATLAB’s capabilities are so powerful that it even allows for ML-trained models capable of self-optimization.

Alternatively, if you know what you are doing, MATLAB can be a gateway to building a robust and powerful trading system with automated execution. Simply put, you can consider it one of the best backtesting solutions, regardless of the use case, be it forex backtesting, to complement your day trading software, or else.

With that said, you probably think that backtesting in MATLAB is rocket science. While for many, it might indeed be that way, for users with a solid mathematical background and basic coding skills, the task is doable.

The reason is that the MathWorks team has a series of in-depth video tutorials to guide you through the process of building backtesting strategies, an auto trading system, a forecasting model, or else. So while it might take much more time to master, it will surely be worth it as there won’t be any limits in front of your trading strategy.


10. Microsoft Excel: The Best Backtesting Solution if You Want to do it the Old-School Way

microsoft excel

Excel is capable of backtesting as well. It was the first widely spread program that traders globally used to build their automated trade execution models.

Building a backtesting function in Excel requires basic knowledge in VBA. For example, if you want to do some beginner-level stock or forex backtesting, then a set of Excel formulas will also do the job. Fortunately, there are thousands of tutorials on how to perform backtesting in Excel, which is why if you are determined to use it, you have all the means to master it.

Furthermore, some brokers like Interactive Brokers even allow you to integrate an Excel-based trading system. The process is straightforward and happens through the installation of the IB Excel API.

On the downside, Excel isn’t as powerful as platforms, explicitly designed for backtesting and automated execution. It is understandable, considering that this isn’t its primary goal.

Considering the minor limitations of the program and the time needed to get it up and running as a stock backtesting software (i.e., building a backtesting function from scratch), if you lack the required skills, I can conclude that Excel might not be among the best backtesting solutions for you and definitely not the most efficient option out there. However, if you want a taste of some old-school trading analysis, this is the one to go with.


Best Backtesting Software: Summary

Backtesting is fundamental for one’s successful trading performance. A while back, it was an exercise reserved only for a selected group of professionals and expensive. Today it is accessible even to beginner investors and traders at low costs. Moreover, thanks to the technological revolution, all types of backtesting software solutions can satisfy even the most sophisticated demands.

The choice of which one to go with depends on various factors, including your experience, trading goals and goals, budget, requirements from the platform, and more.

Those without an active broker account can choose TradeStation’s great offering. Math geeks and traders with programming skills, on the other hand, will lean towards MATLAB. Individuals with a limited budget can take advantage of TradingView. Futures traders will opt for Ninja Traders.

Finally, day traders in search of a ready-made backtesting software solution will find TradeIdeas a great choice.

In the end, it all depends on your preferences, and the best way to find out which one will satisfy them is from first-hand experience.

Backtesting 101 Guide

Backtesting is a popular method for ex-post examination of the performance of a trading strategy. Alternatively, it helps you determine how your current strategy would have performed under particular market developments in the past. The results serve as a likely indication of the potential future performance of the strategy.

Backtesting models are fed with historical data and are powered by automated algorithms that run several iterations (usually in the hundreds or thousands) before presenting the results. Once the backtest is completed, the software shows the results with insights into the profitability level.

The results usually include various parameters that can help you compare the different strategies, including the number of executed trades, trade duration, win/loss ratio, drawdown, and more.

Backtesting for traders is what training is for athletes. Without it, they have no basis to believe they will perform when entering the actual competition like live trading.

Why is Backtesting Important?

Performing backtest is crucial as it helps fine-tune your strategy by trying out different risk management techniques and profitability scenarios to find out the most balanced strategy.

Furthermore, it helps you identify the weak points in your trading model. That way, you can address them on the training ground and examine the strategy’s viability without risking any capital.

Usually, if the backtested strategy shows promising results, traders and analysts gain the confidence that it is fundamentally sound and might be a viable choice to go with. On the other hand, strategies that fail to deliver during backtests will prompt their authors to redesign or scrap them altogether.

If done right by:

  • Testing potential trading strategies on different time frames and data sets,
  • Taking into account trading costs and commissions,
  • Avoiding data overfitting of the model; avoiding built-in bias),

backtesting can prove a powerful weapon that can significantly improve your trading performance.

Drawbacks of Backtesting

Many traders put blind faith in the backtesting results, thinking that if their model has achieved an 80% winning ratio during the backtest, it will replicate it with real-time market data.

The truth is that the whole idea of backtesting is based on the concept that past performance is relevant for the future.

While the cyclical nature of markets means there is sound reasoning behind this theory, the number of unpredictable events in markets is continuously growing. This means relying on backward-looking data might only be partially successful. However, without complementing it with forward-looking technical indicators and trading tools, you will significantly limit your chances for success.

While all trading ideas can be backtested step by step, building one from scratch can be a daunting and resourceful task. Due to this, most retail traders stick to backtesting software solutions like those in the list.

Also, you should know that there is no ideal backtesting scenario. You simply can’t control everything (i.e., black swan events) and expecting 100% accuracy and identical results from your model during backtesting and live trading is usually a recipe for failure.

FAQ

Why should I back test a trading strategy?

You should backtest a trading strategy to validate its efficiency. Backtesting shows you how your trading plan would have performed if applied to past market conditions and use it as an indication for future performance. Furthermore, it helps you identify the weak links in your trading plan and address them while paper trading without risking any capital. That way, you will maximize the chances of your strategy performing well when applied live.

What is technical analysis?

Technical analysis is one of the two primary market analysis techniques and schools of thought in trading. It is an analysis methodology that helps traders forecast the price direction based on historical data. To do that, technicians look at chart indicators to analyze statistical trends and identify patterns in past performance. The goal is to forecast where the price of a particular instrument might be heading in the future. While fundamental market analysis relies on a company’s financials, technical analysis uses indicators to predict price, volume, volatility, and other crucial market information.

What is historical data?

In the context of financial markets, historical data is information about a particular asset that has been collected over the years. The data can relate to pricing information, historical volatility levels, and more. Past data is essential due to the theory that it is indicative of the future performance of the asset. It is also used to analyze the collective behavior of market participants around particular events in the past. Today, historical data is essential for all means of analysis, including power trading models and analysis of market participants, regardless of their trading style, including retail traders, proprietary trading houses, quantitative trading firms, portfolio managers, and more.

Updated: October 04, 2021

About the author: Alexander is the founder of daytradingz.com and has 20 years of experience in the financial markets. He aims to make trading and investing easy to understand for everybody, and has been quoted on Benzinga, Business Insider and GOBankingRates.