Best Backtesting Software for Stocks

Would you like to know if your trading strategy will work before you actually try it? Trading ideas can be good or bad and backtesting software helps you determine which ones will work.

All you need to do is run your strategy based on historical data. In some cases, you can even run it using live market data.

With such a platform, you can test out many different scenarios, such as price targets, stop losses, and profit targets. If the results are satisfactory, then you could try using real cash for live trading.

Today, we’d like to talk about the best backtesting software available out there – but before we do that, here’s the criteria for choosing right.

Top Rated Backtest Software for Traders in 2022

And now, to the good part! Here’s our run-down of the best backtesting software right now.

1. Trade Ideas

Trade Ideas is an open-source backtesting software for stock market trading. It is used by traders from around the world to test their strategies, optimize their trading systems and run their automated trading bots. 

If you are a novice trader or considering starting to trade the financial markets, then Trade Ideas will help you with your journey.

The platform allows you to analyze historical market data so you can see how strategies would have performed in the past. You can then use that information to tell whether or not the strategy would be profitable going forward.

As if that is not enough, you get to analyze risk and reward while testing your system. This tells you the potential downside risk, which is important when deciding whether or not to put real money behind the strategy.

Pros

  • Ideal for beginners
  • Allows for historical data market analysis
  • No coding required

Cons

  • Doesn’t come cheap

2. TradingView

TradingView backtesting software allows traders to test out their strategies using live data. This is extremely useful because it allows you to see how your strategy would have performed in the past. 

If you are coming up with a strategy and want to see if it is worth pursuing, the TradingView software should be an essential tool in your arsenal.

The platform’s interface is intuitive enough that even first-time traders should be able to find their way around without much trouble. Moreover, the site layout is also very easy on the eyes thanks to its clean design.

Another thing about TradingView is that it allows you to access multiple markets which is particularly convenient because instead of having to test your strategy over multiple periods, you can do it all at once if you use this feature correctly.

We also have to mention that one of TradingView's strongest features is its advanced-level charting capabilities. If you're looking for something basic like support and resistance levels or Fibonacci retracement levels, then this program probably has it already built-in.

Pros

  • Features an intuitive interface
  • Advanced charting capabilities
  • Allows for multiple markets access

Cons

  • Doesn’t allow for offline usage

3. Trendspider

Tired of losing money in the stock market? TrendSpider is an innovative backtesting software that lets you test trading strategies before you invest real money in them. 

The software uses technical indicators to gauge whether a particular strategy would have been profitable in the past.

TrendSpider analyzes your strategy using Artificial Intelligence and then decides if the strategy is worth executing or not. It also detects in real-time when your strategy stops working and then executes the best course of action based on your risk tolerance level.

Pros

  • Many positive reviews that make it more credible
  • Suitable for novice traders
  • Affordable pricing model

Cons

  • Can only be used in a single browser at a time

4. MetaStock

Once you have your trading strategy and market, you need the right software to test it. MetaStock is the best backtesting software for traders who want to make a lot of trades and get high-quality results. 

It is a professional tool that allows you to develop strategies, test them on historical time frames, enter and exit trades, and more. Although it is not cheap, you can rest assured that it's very powerful.

Metastock offers an excellent array of technical indicators that can be incorporated into your trading system. You can run a historical simulation for as long as you want like 5 years or 10 years.

Besides, the tool is quite popular among traders and investors, which means that there is an extensive support network available for users to help them get started with their backtesting routines and fine-tune their strategies as needed. 

There are also many tutorials and guides available online, written by users who have experience using this particular piece of software.

The platform works on Mac and Windows computers, which means that you don't have to worry about compatibility issues when choosing your backtesting platform.

Moving away from that, MetaStock has a rich library of features that allow you to strategize about how to make your investments succeed. 

You can perform technical analysis using moving averages and other indicators, perform portfolio analysis using comprehensive reports, and use portfolio simulations to see what would happen if you were to invest with real money.

Pros

  • Comes with high compatibility
  • Numerous guides and tutorials available
  • Extensive support network

Cons

  • Requires some training before you use

5. Interactive Brokers (IB)

Interactive Brokers is a leading online brokerage firm and offers a variety of software programs for its customers. 

IB is well-known for providing a suite of educational resources in addition to its trading platform. The Interactive Brokers software portfolio includes integrated trading platforms, mobile applications, and analytical tools. 

Now, you may also want to note that the Interactive Brokers platform is one of the most powerful and flexible among all of the options available for backtesting. 

It allows you to employ any strategy that you can devise and virtually any set of trading rules that you want to use, including setting trailing stop losses, using moving averages, and so on.

Aside from that, dealing with Interactive Brokers is always an interactive process. You can ask the representatives anything you want; they are always there to answer your questions and help solve your problems. 

The customer service representatives at Interactive Brokers are trained to do their best to help you as soon as possible.

Finally, Interactive Brokers provides users with numerous assets and trading options. There are many assets available on this platform, including stocks, ETF’s, Forex, and futures. 

Some customers favor this platform because of the numerous assets it provides.

Pros

  • Various assets and trading options for users
  • Exemplary customer support
  • Flexible and powerful

Cons

  • Commission rates are not competitive

6. MatLab

Matlab is a software package used in engineering and science for solving problems that are mathematical in nature. 

It is also widely used by financial analysts when they run simulations of complex financial models. The software can be used to help people make decisions about stocks, bonds, and other investment vehicles, such as mutual funds. 

For instance, a financial analyst may want to model the performance of a stock over time based on various conditions. 

The program can then forecast how the stock will perform under various circumstances and use the results to determine how investors should act.

It is important to note that MatLab isn't limited to financial engineering and portfolio analysis; you can use it for data analysis, signal processing, machine learning, control system design, and more. 

Moreover, the Financial Engineering Toolbox gives you access to additional features that help you analyze historical data, including efficient numerical algorithms and functions that let you use common trading strategies to analyze your results.

Tried and true, MatLab has long been the gold standard for backtesting software. It's robust and reliable, giving you all the tools, you need for your analysis. 

You can use it for any kind of financial forecasting or modeling — from simple profit-and-loss calculations to complex Monte Carlo simulations — and it's easy to integrate with other programs, so you can use it in conjunction with your existing tools.

Another interesting aspect of MatLab is that it can be used as a high-level programming language. This means that you can use the platform to create trading objects that can do the heavy lifting using pre-written algorithms, while you focus on the logic and strategy behind your system.

Pros

  • Can be used as a programming language
  • Can be easily integrated with other programs
  • Robust and reliable

Cons

  • Complex documentation is an issue

7. TradeStation

TradeStation is a powerful trading software that allows traders to simulate real-time market conditions so that they can test out strategies and get an idea of how they would perform in actual trades. 

It is highly customizable which means that you can even set up your own strategies. You can create both technical or fundamental tests, or you can even combine them both.

Tradestation has a user-friendly design and by that, we mean that the software is easy enough to understand and work with. 

Its learning curve is short and this works because even beginners can get used to it in no time.

The platform also exhibits simplicity in programming. The software enables the user to easily define their rules and strategies, thus allowing them to focus more on the development of their strategies instead of struggling with the program itself.

Other than that, it has a history storage feature. Now, while the options offered by the software will vary as far as history storage is concerned, the feature is certainly a plus.

Pros

  • Features easy programming
  • Comes with a short learning curve
  • User friendly

Cons

  • Finnicky tools, you can get better value elsewhere

How To Choose Good Backtesting Software for Stock Trading

Different software programs have different specs and functionalities. And for that reason, we suggest paying attention to the following points so you can find just the perfect backtest tool for your trading strategy.

1. Availability of historical data

It is important to have a backtesting tool that provides you with ample access to historical data so that you can see how exactly certain trades would have fared in different market conditions.  

2. Real-time market analysis

Getting a program that enables you to simulate trades based on live market data is, no doubt, a good thing. It gives you a real feel of the market in real-time.  

3. User-friendliness zz

Of course, as a trader with a busy schedule the last thing you want to deal with is complexity when trading. So, a good backtester is one that is easy and straightforward to use - requiring not even a single line of coding.

4. Compatibility with AI

One of the most important things to consider when looking for back testing software is whether or not it is compatible with artificial intelligence. 

This allows you to take advantage of machine learning technology that can reduce your time spent on manual analysis and focus on more important aspects of trading strategies development.

5. Customer Support

You want to make sure that the company selling you this software will be able to answer any questions you have about it, and help troubleshoot any issues that might come up along the way. 

It would also be nice if there are forums or other places where users can ask questions and get answers from other users or staff members at the company.

Frequently Asked Questions

Here are some commonly asked questions about backtesting software that we feel will give you a better understanding of the same.

Does backtesting really work?

Sometimes, backtesting can lead to over-optimization. Ultimately, backtesting is not always the best method of measuring trading systems' effectiveness. Previous performance will not always determine future results.

Which platform is best for backtesting?

Several platforms perform well when it comes to backtesting and it all depends on what you want to achieve. That said, all the ones we have discussed above do well.

Why would backtesting not work?

The main reason why backtesting would fail to work is that market conditions continually change.

Conclusion

Whether you are a novice or an experienced trader, you should use backtesting software as part of your day-to-day activities. 

These programs allow you to speed up the process of creating algorithms and strategies, while also helping you confirm their validity before you invest in them.

Go ahead and pick any of the ones we have reviewed and watch your trading endeavors go a notch higher.