Backtesting help guide

Strategy backtesting

Strategy backtesting allows you to build and test trading strategies across a range of historical dates. Tests can be made against specific symbols or you can use position sizing rules to simulate multi-holding portfolios.

Strategy

A strategy consists of trade criteria, stops, targets, and position sizing rules. For example, a strategy may consist of the following elements:

• buy when the Close Price crosses above a 10 day Moving Average
• sell when the Close Price crosses below a 5 day Moving Average
• close a position, using a stop, if it loses more than 5%
• close a position, using a target, if it gains more than 20%
• start with equity of 100,000
• buy 100 shares on each trade regardless of stock price or volatility
• maintain no more than 10 open positions at a time, with a maximum of 5 new positions on any one day
• when there are more buy signals than position slots available, choose stocks in descending order of 10 day Average Volume.

See the custom strategy help pages for more detailed information on creating strategies.

Backtesting

Once you have created a strategy you can then backtest it against a variety of stocks over a selected time period. When the test is complete various reports and charts are provided to give you detailed feedback on the performance of the strategy.

Backtesting is an iterative process of testing your strategy, analyzing the results, making adjustments, and re-testing. It can help you find which trading approaches work profitably as well as those which do not. 

See the test strategy and strategy results help pages for more information.

Various backtesting preferences can also be set which will then affect all strategy backtests.

Supported exchanges

Backtesting can be performed on all stocks listed on the NASDAQ, NYSE, AMEX, NASDAQ small-cap, bulletin board and pink sheets. You can choose individual exchanges, watch lists, index components, or specific symbols.

End-of-day data

Backtesting uses end-of-day data. Provisional information from the latest day is normally available by 5.00PM ET. A secondary update is applied by 7.45PM ET (or 8.45PM during daylight saving period). This happens immediately after we receive the daily file of cleansed market data from our data provider.

Discontinued symbols

Currently, when any stock is delisted, taken over, etc that symbol and it's price history are removed from the database and will not be included when backtesting. This could have an effect on your testing as  one or more of these stocks may have met your trade conditions. This can skew your results in either direction, eg bad stocks may have been delisted and good stocks may have been taken over.

Also be aware when comparing performance against indices that many indices are actively managed and the components change regularly.

Subscription plans

See the subscriptions page for a complete comparison of the backtesting entitlements of each of our plans.

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