Backtesting Software

Welcome back to our series on backtesting. I'm Adrian Read. This is enlightened stock trading. And in this video, I'm going to talk to you about backtesting software. But before we go any further, make sure you hit the subscribe button and give this video a thumbs up so that you get notified of all of my future videos, because I've got new trading content coming out all the time and I don't want you to miss a thing. There is a huge range of backtesting software out there, but how do you choose the right one? Which software is best? Which is what I want to do in this video is give you an overview of all of the major backtesting programs, some advantages and disadvantages, and then give you some recommendations for which backtesting software you should consider. All right, so let's jump into it. I want to start with amibroker backtesting. Amibroker backtesting is probably one of the fastest and most powerful approaches to backtesting in the market. So the software is called amibroker. It's not, as the name suggests, a broker. It's just trading software. So that's a little bit misleading, but it's very powerful trading software that does portfolio style backtesting. Portfolio style backtesting is where you backtest a portfolio system. As in, you might have a stock trading system that holds up to 20 or 30 different stocks in the portfolio at any one time. And the rules of the system manage the entries and the exits and the position sizing of all of those different stocks. Portfolio back testing is absolutely essential if you want to systematically trade in stocks because you typically don't want to trade a system on an individual stock ticker. You want to trade a system on a portfolio of stocks. Now, what are the advantages of amibroker? First of all, it's cheap. It's only a couple hundred bucks, so it's very affordable to get into. You also get a free trial, which is pretty fully featured, so you can get a sense for how the software works. Amibroker is also very, very fast. It's quite well programmed, so the backtests run extremely quickly. So do the optimizations. The coding language is Amy Brooker's own in house coding language. It's called Amy Broker Formula Language afl. It's moderately easy to learn. It's not the easiest coding language I've ever seen, but as long as you keep your systems fairly simple, which you should, it's pretty straightforward. It's kind of like writing fancy Excel formulas. And you Just string them together with logic statements and references between the formulas. So. So amibroker formula language is pretty easy to learn. I'm not a coder by any stretch of the imagination. The only reason I code is because I need to code for my systematic trading. So I'm a trader first, coder second and I can manage with amibroker. I've been using amibroker for quite a few years. It's a really powerful tool. There are a few shortcomings though. The shortcomings are that there's certain functionality that you have to do a custom, what's called a custom backtest for and, and custom backtest is kind of shorthand for bloody complicated code. And so I'm not a fan of that. I would much rather have all the complexity behind the scenes and me just configure the trading software to do what I want. So things like scaling in, scaling out, things like certain types of trailing stops are moderately complicated to code. Some sort of ranking methodologies can also end up being quite complicated to code. If you want to code a limit order system where you submit say 10 limit orders at the start of the day and only some of those will be filled in. Amibroker, that's quite complicated to code. So there is some downside. The other downside is the community for amibroker is, to be honest, not that great. It's a little bit toxic. And look, I can kind of understand it because Amy Broker has been around for a while, it's got a lot of users. It's also got a lot of pirate users, as in people who have got cracked versions of the software and they still lean on the original developer to try and get answers and get spoon fed how to fix all of their problems. So it's kind of understandable that it's evolved or devolved into a kind of toxic community, but it's not great. So when my students use amibroker, I keep them away from the external community and we manage all of that amibroker support in house. And the reason is we have a fantastic community in the Trader Success system, which is positive, friendly, supportive and uplifting everything that the Amy Broker community frankly is not. So if you want to learn amibroker and get support in your backtesting, then the Trader Success system is the way to do that.

So amibroker, highly cost effective, really powerful and fast, little complex for certain types of tasks. The one really big drawback which I find very frustrating about amibroker is you cannot test multiple systems simultaneously in a portfolio. So you can't backtest portfolios of systems in amibroker. It's only one system at a time. Now within each system you can have many stocks. So it does portfolio testing correctly, but it doesn't do portfolios of systems correctly. And that's where the next trading software really shines. So the next training software I want to talk about is Real Test. And Real Test backtesting is absolutely brilliant. It's a relatively new piece of software, certainly compared to amibroker created by Marsden Parker, who is one of the unknown market wizards in Jack Swager's new book. And Marsden is a super smart guy, super friendly, great trader and really, really supportive of the trading community. And he produced a brilliant piece of software in Real Test and RealTest. Backtesting, as I said, is just a breeze. The coding language is super easy, very logical. It takes care of all of the edge cases and anomalies and everything neatly in the background very easily. Back tests limit order systems correctly. You can test portfolios of systems simultaneously and optimize the weightings between all of those systems. So Real Test is just a really strong modern piece of software, which I love. One of the great things about RealTest as well is it integrates with interactive brokers and so you can, it can manage the order placement for you as well, which amibroker doesn't do natively. So that's Real Test. If you want to do portfolio backtesting and you want the most up to date modern software, Real Test is a really, really good choice. I use a combination of amibroker and Real Test. I haven't fully migrated to Real Test and I don't think I will. I like to have several different alternatives just in case something goes wrong. There is a single point sensitivity in Real Test right now in that the founder of the business, developer of the software, you know, is kind of like the key person in there and there's not a huge community yet of Real Test users and power users. It's growing and in a couple of years time I think it'll be a clear winner. The next trading software I want to Talk about is TradeStation. TradeStation is a big name in the industry and it's a combination of both a broker and a backtesting or trading software. This combination is really neat because the broker provides you the data that feeds into TradeStation software for your analysis and backtesting, which is fantastic because it means you don't have to pay extra for all of the data feeds. So if you're a futures trader, TradeStation is a really good choice. The trouble is, the TradeStation backtesting software, frankly, is a bit of a dog. It's 32 bit software, it's old, it's slow, and it needs a complete revamp.

I would say the main advantage of TradeStation is you get the data straight from the broker for free. It's all integrated. And once you've coded a system in TradeStation, it's automatically ready to automate in the TradeStation brokerage. And that's a really good advantage. You don't have to do anything extra to automate when you're using TradeStation. But there's a couple of big downsides, apart from the fact that it's a slow old dog. It's 32 bit software. The optimization is hellishly slow compared to Amibroker and RealTest. Frankly, I just would never even optimize the system in TradeStation. It's too slow. Amibroker is about 15, 20 times faster and RealTest is faster again. But the other problem with TradeStation is it's a single instrument backtester. It cannot backtest portfolio systems. So you're limited to certain types of Systems. Now, most TradeStation users, to be fair, are probably futures algo traders, and futures algo traders tend to trade single instrument systems. So one system trades one ticker. So if that's what, if that's what you trade, TradeStation is okay. If you want to trade a portfolio system where the system holds multiple stocks simultaneously, TradeStation won't cut it. So that's a serious drawback in my world. But as I say, if you're a futures trader and you want to do futures algo trading, I would say TradeStation is a pretty clear winner because the integration of the data and the trading software and the automation, it's a very common choice for futures traders. For stock traders, not so much. The next trading software I want to Talk about is MultiCharts. Now, MultiCharts backtesting is quite a bit better than TradeStation. It uses the same language as TradeStation. Both MultiCharts and TradeStation use easy language, which is, as the name suggests, very, very easy. Certainly easier than afl. Amy broke a formula language.

But multicharts has the advantage that you can do portfolio backtesting in there. So if you want to use easy language and test portfolio systems, then MultiCharts is the go. MultiCharts does also have automation capabilities, so you can automate out of the box if you've got the right version of the software. You do need the automation version, but it's Native you don't need extra bolt ons. Aside from that, the backtester in Multichart is pretty good, I would say. It's not as fast as Real Test and amibroker, but still reasonable. And it's a pretty good piece of software and a good choice if you want to use easy language. The next trading software I want to talk about is metastock. Meta Stock is one of the industry, you know, the biggest industry names because it's been around for a long, long time. The Meta Stock trading software is absolutely fantastic for technical analysis. So discretionary chart based traders often choose Meta Stock. It's got great charting, really nice interface, lots of great charting tools, you know, price EAS and interpretations that you can overlay onto the charts. The challenge with Meta Stock is that again it's a single instrument backtester. So metastock backtesting is nowhere near as good as amibroker or Real Test or multicharts. So if you want to trade single instrument systems and backtest those, metastock is okay. The backtester I would say is still a little bit rudimentary, but it works and it's, you know, it should be a reasonable indication of system performance. But if you want to trade portfolio systems, MentorStock can't do it. So just like TradeStation you're going to use have to use a different software.

Metastock does have great support, it's got a great community, there's plenty of third party coders, there's lots of additional add in systems and indicators that you can buy for it. So as an ecosystem goes, Medstock ecosystem is really, really good. So worth using if you're a technical discretionary trader. If you're a systematic trader and you're using single instruments. Also worth considering if you're using portfolio instrument systems, then Medstock won't cut the mustard as far as backtesting goes. The the next trading software I want to talk about is Trading View. Now Trading View backtesting is again pretty rudimentary. Trading View is built for discretionary technical analysis. It's a great charting interface. It's got great data feeds, access to all of the markets that you'll possibly need, and lots of indicators you can overlay on your charts, great chart annotations and ability to edit, manage and manipulate your charts. But backtesting is again pretty much a dog if you, if you want to backtest in TradingView, you've got to learn Pine Script which is nowhere near as easy as easy language or AFL and certainly nowhere near as easy as Real test and you're also limited to single instrument systems. So I would say the backtesting in Trading View is a second thought at best. And so if you want to move from discretionary technical analysis to systematic trading, I would say just get off Trading View, learn some proper backtesting software, go straight for amibroker Real Test or maybe Multi Charts and just give Trading View a miss. Keep that for your discretionary technical analysis. Next thing people often ask me about is Excel backtesting. Can I backtest my trading rules and ideas in Excel? And yes, the answer is you can. And there's APIs to to get stock data coming into Excel and that can work effectively. The trouble is Excel is just not built to be a backtesting engine. So you're going to have to create all the formulas yourself or find templates from the web and you'll have to do all of that analysis on your own. Compare that to say amibroker or Real Test where all of the back testing protocols are built in, the reports are built in, all of the output charts are built in, the analysis just so much easier. So I would prefer to choose a system or software which is fit for purpose, designed for that purpose. Yes, you can make Excel do pretty much anything with numbers. Does that mean you should? I don't think so. I would much rather choose Amy Broker or Real Test any day of the week because they're just built for backtesting. Excel is built to do anything with numbers, it's far too generic at all. So Excel back testing free but not really optimal. Last thing that I want to mention today is Interactive Brokers backtesting. Now I see a lot of people online asking how do I back test with Interactive brokers? And the short answer is you can't. There is no native back testing capability in Interactive Brokers platform. So just, you know, you have to just move on. They have some add in tools that sort of start to get towards backtesting but really if you want to backtest your trading systems then you need a separate piece of software that interacts, that interfaces with Interactive brokers. Now if you use Interactive Brokers and amibroker at Enlightened Stock Trading we've developed or co developed the Smart Stock Automation engine which links amibroker and Interactive Brokers really really neatly. It'll run, it'll manage the entire process in amibroker it'll update your data, run your backtest, find your signals, position, size them, find the data from the account size from Interactive Brokers, adjust the position size, manage your exposures all of that into end automate the entire process. There's a link down below if you want to learn how to use the Smart Stock automation engine to link amibroker and Interactive Brokers beautifully. But if you want to backtest Interactive Brokers, you can't. So you need extra software externally. So having said all of that, what is the best backtesting software you've probably realized by now I favor two I favor amibroker and I favor realtest. I like amibroker because I've been using it for a long time. Super fast, cost efficient and really really powerful and it's got a great support base. There's a lot of users out there, there's quite a few power users and there's several external quite a few external coders that are really really sharp and will do the job for you if you don't know how to do it in amibroker. So I really like that aspect of it and I really love Real Test because Real Test is the only backtesting software that really does a great job at a cost effective price anyway of multi system backtesting and optimizing capital allocations between systems as well as testing for individual systems on a portfolio basis. Real Test also not terribly expensive so it's a great option and very easy to learn. So my two choices for the best backtesting software, amibroker and Real Test. I have both. I use both. If you are starting from scratch now, either of those will do the job. Real Test will probably take you further, but you're probably going to find that you want both because as I say, I like to have redundancy in my trading. I've got multiple brokers, I've got multiple trading software, I've got multiple computers, I've got multiple data providers. I want multiple everything because I want redundancy so that my trading business is as robust and stable as possible. So in this video we've talked about back testing software. There are other softwares around and I may add additional comments to this blog post about different trading softwares, but those are the main ones that I come across in my trading journeys and I've talked about the ones that I've used as well. So that's all for this video. In the next video I'm going to talk about frequently asked questions to do with backtesting. So that's all for this one. I'll see you in the next one. Bye for now.

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