Backtesting Stock Trading Strategies
Tools for traders
How backtesting can improve performance and the features we offer stock traders
There are a number of important reasons why backtesting is essential for developing profitable stock trading strategies.
Backtesting allows you to test your strategy in a controlled environment. This means that you can fine-tune your strategy without risking real money.
But arguably the most important reason to backtest is that the practice can help you identify when to trade and when to stop. For example, you might find that your strategy works well in bull markets but not in bear markets.
The primary benefit of backtesting is that it can help stock traders confirm the presence of a trading edge.
Once you identify that edge, you can turn it into a rules-based strategy that removes emotion from the equation. This will help you make better decisions when trading.
Stock traders who approach their craft with a thought-out plan are less likely to change their goals or abandon their strategy.
There are three ways to test a stock trading strategy:
1. Manual backtesting
Manual backtesting is looking at charts and prices, or historical data in Excel, to see how a strategy performed in the past. This can be done by traders who lack programming knowledge. However, it takes a lot of time.
2. Backtesting with code
Many traders choose to write their own backtesting algorithms. They often use a programming language called Python to do this. This language is easy to learn and there are many libraries that can be used to develop backtesting systems.
3. Backtesting tools that automate the process
If you're not a programmer, writing code to test your trading strategies can be hard. You can use software tools to help you write code to test your trading strategies. This will automate the backtesting process so you don't have to write any code yourself.
Experienced stock traders who incorporate backtesting into their process look for backtesting tools that have the following features:
Accurate historical price data
If you want to test a stock trading strategy, you will need accurate historical price data for the stocks you plan to trade. Without accurate price data, your backtesting results will be meaningless.
A wide variety of indicators
In order to test the reliability of your strategy, you need to use a backtesting platform that features a range of different indicators. This includes both technical and fundamental metrics. That way, you can build strategies that perform well in different markets and under different business conditions.
Rich analytics to help you optimize your strategy
The best stock backtesting platforms feature a wide variety of analytics. This way, you can look into the details of your strategy and see where you can make improvements. It is also helpful if the analytic output is accompanied by graphic visualizations.
There are a few reasons why Tradewell is a great choice for backtesting stock trading strategies:
Thousands of Stocks
The Tradewell platform features over 65,000 tickers, including US Equities, ETFs, Mutual Funds, and Chinese A-Shares.
Diverse Time Intervals
The platform works for traders who want to trade stocks across longer or shorter term time horizons. With Tradewell, you can test your strategies on different time intervals: intraday, daily, and weekly.
Tradewell makes it easy to backtest different stock trading strategies. And you don't need to know how to code to use it. Just select the stocks and indicators you want to study and Tradewell will do the rest. This saves time and makes it easier for you to experiment with new trading ideas.
We also provide visual analytics tools to help you understand the risk and results of your tests. This helps increase your confidence that your ideas actually represent sound trading strategies.
The platform offers a library of thousands of indicators that can be used to test how your stock trading strategies would have done in the past.
Free to Get Started
The Tradewell platform is free for any trader to use. There are no upfront costs or commitments. Traders can start backtesting their strategies immediately.