Best Backtesting Software: Top Tools for Analyzing Trading Strategies - Trading Heroes (2024)

Let's face it, backtesting is a vital part of becoming a successful trader.

It allows you to test your trading strategies on historical data to see how they would have performed in the past.

However, backtesting with a simple chart and a spreadsheet to record your trades can be time-consuming and prone to errors.

That's where backtesting software is extremely valuable.

The best backtesting software can save you time and provide more accurate results than spreadsheet backtesting.

With so many options available, it can be overwhelming to choose the right one.

In this article, we'll explore some of the best backtesting software on the market and help you make an informed decision.

There will be options for both automated and manual backtesting, across all major trading markets.

We'll also discuss the importance of backtesting and key features to look for in backtesting software.

Understanding Backtesting

Backtesting is a technique used to evaluate the effectiveness of a trading strategy by applying it to historical data.

This data is important because markets tend to have their own personality and price action that happened in the past is likely to continue to happen in the future.

It's an essential tool for traders looking to verify and optimize their strategies and improve their performance.

If you're new to backtesting, here's a summary of how it works.

The Importance of Historical Data

Historical data is a crucial component of backtesting. It's used to simulate how a trading strategy would have performed in the past.

The more accurate the historical data, the more reliable the backtesting results will be.

So be sure to use the cleanest backtesting data you can afford.

Also find out if a backtesting platform factors in things like the spread, commissions, volume and liquidity.

Key Performance Indicators

Backtesting produces a wide range of performance metrics that can be used to evaluate the effectiveness of a trading strategy.

Some of the most common key performance indicators (KPIs) include:

• Profit and loss (P&L)
• Win rate
• Maximum drawdown
• Sharpe ratio
• Maximum number of losers in a row
• Average monthly return

These metrics can help you identify strengths and weaknesses in your strategy and make adjustments accordingly.

Make sure that your backtesting platform provides these metrics before you buy.

By understanding the role of historical data and key performance indicators, you can use backtesting to gain valuable insights into your trading strategy and make data-driven decisions.

Top Backtesting Software Platforms

If you're looking for the best backtesting software, you have many options to choose from.

Here are the top backtesting software platforms to consider:

NakedMarkets

NakedMarkets is a fantastic combination of manual and automated backtesting features.

If you want to backtest manually, it performs just like any other manual backtesting platform.

However, if you want to start creating automated or semi-automated trading strategies, you can build them easily with their built-in, no-code module called Rule Manager.

The interface is entirely drag and drop and provides many options.

On top of that, they provide free updated historical data and a Fast Backtest feature that will speed up your backtesting.

To learn more, read my full NakedMarkets review.

• Type of backtesting: Manual, semi-automated, automated
• Markets: Forex, stocks, futures, indexes, metals, crypto

TradingView

TradingView is a cloud-based backtesting software platform that offers a variety of benefits for traders.

The best part is that it's used in a browser, so there's no temperamental software to install.

It allows you to backtest your trading strategies using historical data with their proprietary programming language called PineScript and provides you with detailed reports to help you analyze your performance.

There are also community built trading strategies that you can test with just a few clicks.

Until recently, my only complaint about TradingView was that they didn't provide enough historical data.

But they recently launched their Deep Backtesting feature that's available on higher priced plans. It gives you full access to all historical data in their database and solves that problem.

You can read my full TradingView Review here.

• Type of backtesting: Automated
• Markets: Most markets are available

Forex Tester

Forex Tester is the very first backtesting software I ever used.

It can do manual backtesting and can also backtest automated MetaTrader Expert Advisors (EAs).

The biggest downside is that it lacks proper analysis features.

Otherwise, it's a solid piece of software.

If you want to learn more, read my complete review here.

• Type of backtesting: Manual, automated
• Markets: FX, stocks, crypto, metals, indexes, futures

Amibroker

AmiBroker is a powerful technical analysis, backtesting and trading software used by traders to analyze financial markets.

Traders can develop and test trading strategies using AmiBroker's proprietary AFL (AmiBroker Formula Language) programming language.

It provides access to historical data from various sources and supports automated trading integration with brokerage platforms.

One cool feature is that you can download historical stock market data from Yahoo Finance for free.

• Type of backtesting: Automated
• Markets: Best for stocks although other markets can be used

NinjaTrader

I've never liked NinjaTrader because it's so clunky.

But it IS a popular trading platform that offers advanced charting, backtesting, and automated trading functionalities.

It allows traders to develop and test trading strategies using historical data and provides a wide range of tools for strategy optimization.

One thing that stands out in NinjaTrader is the ability to do both automated and manual backtesting.

Professional traders do use this software. If you can get used to the interface from 1995, then it's probably a solid platform.

• Type of backtesting: Automated, manual
• Markets: Futures

MetaTrader 4 and 5

Both MT4 and MT5 offer built-in backtesting functionalities that allow traders to test their trading strategies using historical data.

While not as advanced as dedicated backtesting software, MT4 and MT5 are widely used for backtesting.

You can spreadsheet backtest in MT4 and MT5, as shown here, but it is clunky.

These platforms are more built for automated trading strategies called Expert Advisors (EAs) using the MQL4 and MQL5 programming languages.

It's a decent automated backtesting platform…if you know how to code.

• Type of backtesting: Automated, limited manual capabilities
• Markets: Forex, stocks, metals, futures, indexes

ProRealTime

ProRealTime is a comprehensive trading platform offering advanced charting, technical analysis tools, and backtesting capabilities.

It allows traders to develop, test, and optimize trading strategies using historical data.

ProRealTime provides access to a wide range of markets, including stocks, forex, and commodities. Traders can customize indicators, implement automated trading systems, and analyze performance metrics.

The user-friendly interface and robust features make it popular among traders seeking sophisticated analysis and strategy development tools.

• Type of backtesting: Automated
• Markets: Most markets available

cTrader

cTrader is a user-friendly trading platform that features a community of “cBot” builders.

The platform is well designed and easy to use.

It offers advanced charting tools, customizable layouts, and a wide range of order types to cater to diverse trading needs.

Automated trading programs are coded in C# and they have a library of tutorial videos available to get you started with algo trading.

It's popular among traders for its reliability and robust functionality.

• Type of backtesting: Automated
• Markets: Forex and CFDs

StrategyQuant

StrategyQuant is a software platform that allows traders to develop, backtest, and optimize automated trading strategies using a visual strategy builder and genetic algorithm optimizer.

So no coding is necessary to build automated trading strategies.

You can even export your strategies to other platforms like MetaTrader, TradeStation and MultiCharts.

It provides access to historical data and offers advanced backtesting capabilities for testing and refining trading strategies.

• Type of backtesting: Automated
• Markets: Stocks, Forex, Crypto, Commodities, Futures, Indexes

TrendSpider

TrendSpider is part of the next generation of trading and backtesting platforms.

It provides deep analysis of trading markets to come up with new trading ideas.

You can get detailed analysis of your backtesting and run backtests in multiple markets at the same time.

The backtesting platform does not require coding and trade entry and exit commands can be entered in plain English, thanks to the GPT rule builder.

• Type of backtesting: Automated
• Markets: Most markets available

MultiCharts

MultiCharts is a professional trading platform offering advanced charting, backtesting, and automated trading capabilities.

It allows traders to analyze markets, develop trading strategies, and execute trades across multiple asset classes.

MultiCharts supports a wide range of technical indicators, drawing tools, and trading strategies.

The platform provides easier automated trading program development by using PowerLanguage, which is based on TradeStation's EasyLanguage.

I considered getting MultiCharts before I bought Amibroker, but the extra cost didn't seem like it was worth it.

But it might work for you, so check it out.

• Type of backtesting: Automated
• Markets: Most markets available

TradeStation

TradeStation is one of the oldest backtesting platforms on this list. Even though they have been around for awhile, they continue to innovate and keep up with the times.

This platform allows you to backtest your trading strategies and provides you with detailed reports to help you analyze your performance.

You can use their pseudo-coding language called EasyLanguage to create strategies for backtesting and live trading.

They also provide a pre-built library of strategies that you can use as starting points.

The platform is known for its user-friendly interface and extensive educational resources, making it a great choice for both beginner and advanced traders.

• Type of backtesting: Automated
• Markets: Most markets available

QuantConnect

QuantConnect is a cloud-based backtesting software platform that offers a variety of features for traders.

It allows you to backtest your trading strategies and provides you with detailed reports to help you analyze your performance.

With QuantConnect, you can also automate your trades and execute them in real-time.

The platform is known for its advanced algorithmic trading tools and extensive community support, making it a great choice for traders who want to collaborate with others.

• Type of backtesting: Automated
• Markets: US SIP, CME, FX, Crypto

FX Replay

FX Replay is an online manual backtesting solution, which is fantastic because you can do your backtesting in a browser and you don't have to install temperamental native software.

They also use TradingView charts, so they are super smooth and easy to use.

The only issue that I have with this solution is that their tools are super simple.

So if you're just getting started, this might be a good option for you.

It's better than the manual backtesting capabilities of TradingView.

But, if you need something with better analytics and advanced features, this might all a little short.

There are several FX Replay alternatives, if this solution is not for you.

Incorporating Technical Analysis

When it comes to backtesting, understanding technical analysis is essential to ensure that your trading strategies are based on sound principles.

Technical analysis involves using past market data to identify trends and patterns that can help predict future price movements.

Here are some key tools and techniques you can use to incorporate technical analysis into your backtesting process.

Charting Tools

Charting tools are an essential part of technical analysis.

They allow you to visualize market data in a way that makes it easier to identify trends and patterns.

Candlestick charts are a popular charting tool that displays the open, high, low, and close prices of an asset over a specific time period.

Line charts can also be useful for identifying trends over time.

Technical Indicators

Technical indicators are mathematical calculations that use market data to identify trends and patterns.

They can be used to confirm or contradict other signals you see in the market.

Some popular technical indicators include Moving Averages, Relative Strength Index (RSI), and the Stochastic Oscillator.

Trend Analysis

Trend analysis involves identifying the direction of the market and using that information to make trading decisions.

Trendlines and moving averages are a common tools used to identify trends.

By using charting tools, technical indicators, and trend analysis, you can develop a trading strategy that is based on sound principles and has a higher probability of success.

Software Features for Different Trader Levels

When it comes to backtesting software, different traders have different needs and preferences.

Some traders might be beginners who are just starting out, while others might be experienced traders looking for advanced features.

Institutions, on the other hand, might need software that can handle large amounts of data and complex strategies.

Here are some software features that cater to different trader levels:

For Beginners

If you're new to backtesting, you'll want software that is user-friendly and easy to navigate.

Look for software that has a simple interface and allows you to import data easily.

You might also want software that has pre-built strategies that you can test out without having to create your own.

Some backtesting software for beginners includes NakedMarkets, TradingView and Forex Tester.

For Experienced Traders

If you're an experienced trader, you'll want software that has more advanced features and can handle algorithmic trading.

Look for software that allows you to code your own strategies and backtest them.

You might also want software that has AI and machine learning capabilities.

Some backtesting software for experienced traders includes Amibroker, which allows you to code your own strategies in a variety of programming languages, NakedMarkets and TradeStation.

For Institutions

If you're an institution, you'll want software that can handle large amounts of data and complex strategies.

Look for software that can handle multiple users and has robust security features. You also want software that has a dedicated support team.

Some backtesting software for institutions includes MATLAB, which can handle large datasets and has advanced analytics capabilities, and TradeStation, which has a dedicated support team and can handle multiple users.

Overall, when choosing backtesting software, it's important to consider your level of experience and the features you need.

Whether you're a beginner or an institution, there is software available that can cater to your needs.

Optimization and Real-Time Testing

The best backtesting software goes beyond just historical analysis.

It offers optimization and real-time testing capabilities that help you improve your trading strategies.

Strategy Optimization

Optimization is a powerful tool that helps you fine-tune your trading strategy by testing different parameters and variables.

With backtesting software, you can easily run optimization tests to find the best combination of parameters that maximize your profit and minimize your risk.

Most backtesting software offers a variety of optimization methods, including brute force, genetic algorithms, and AI based logic.

These methods allow you to test a large number of variables and find the optimal parameters for your trading strategy quickly.

Live Market Testing

Real-time testing is another critical feature of backtesting software.

It allows you to test your trading strategy in live market conditions before risking real money.

With real-time testing (also known as forward testing), you can see how your strategy performs under current market conditions and potentially adjust it accordingly.

Backtesting software with real-time testing capabilities offers a range of features, including live data feeds, order execution, and broker integration.

These features allow you to simulate live trading conditions and test your strategy in a risk-free environment.

Conclusion

Picking the best backtesting software for your situation and the markets you trade is the first step to becoming a successful trader.

The right software will help you verify and optimize your trading strategies efficiently.

You don't have to buy the most expensive software either. Start with the best you can afford right now and go from there.

That might be all you ever need.