Forex Back Testing Software

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I was struggling to take trades that I learned from books and courses.  The reason I was nervous pulling the trigger was because I was not confident in how the trades worked or if they would work at all.  But what could I do?

For me the answer was simple, I had to practice and backtest these strategies.  However, it was difficult to find a forex backtesting software solution that suited my needs.

MetaTrader is good for testing automated systems, but I wanted to find a system that would simulate actual market conditions by allowing me to add indicators, step through each candle/bar and take trades as the signals came up.

This what I really needed because it is tough to go back through complete charts and try to simulate what I would have done in a particular situation.  Sure, I could use a piece of paper to uncover the chart slowly to simulate the market unfolding, but my arm got tired and it was hard to write down the trades and hold the paper at the same time.

All joking aside, I read about all these famous traders doing a lot of backtesting before trading real money or client money.  But how could I do it without paying an arm and a leg?

Disclosure: This post contains affiliate links and I do make a small commission if you purchase through these links.  This helps keep this blog going and does not cost you anything extra.  I promote this software because I believe in it…period.

Other Backtesting Solutions

Don’t get me wrong, when I was looking around, there were a few really good systems out there for doing backtesting.  The trouble was that they either only did automated tests, were really expensive, or had a monthly subscription fee.

I would have been in the hole a several hundred to a few thousand dollars before I was able to come up with a trading technique that would actually start making money.

My Big Ah-ha!

Then I went to a Rob Booker workshop and he told us that he considered himself a full-time backtester and a part-time currency trader.  Many of his most successful students and himself included, were successful because they did a TON of backtesting.  Interesting, I might be in the right place…

And as it turns out, I was.  He had found this program called Forex Tester and it is how he and his students tested trading strategies to find trading techniques that worked best for them.

I was so excited that as soon as I got home from the class, I downloaded the program.   It definitely lived up to my expectations.

Here are just a few of the features:

• The program is very affordable -  It is just a one time fee, NO monthly billing.  At the time of this writing, it only costs $150.  I wouldn’t be able to even buy the historical data for other programs or other subscription based forex backtesting software programs would only allow me to backtest for 1-2 months for that amount of money. UPDATE (5/1/2012) – The price has been raised to $199, but if you go to the last link on this page (after the video), it will give you a 10% discount.
  
• You can add your own custom indicators (you can either find them online, program them in or find a programmer to do it for you)
• You can see multiple time frames individually or you can have multiple time frames up at once.
• You can get free, high quality historical data to test with directly from their website.
• The program allows you to not only have multiple windows open with different time frames in the same currency, but you can have multiple windows with different currencies.  This will allow you do test for market correlations or practice hedging techniques.
• You can save your testing projects for review later.
• After you are done testing, you can double click each trade in the history log and the program will automatically move the chart to that trade.  You can then scrutinize your trades and find any common elements that can make you more profitable.
• You can try this forex back testing software for free before you buy.
  
• You can write notes on every trade so you can go back later and sort your trades by type.
• You can export your trade log for analysis in Excel or any other program.
• The program keeps a running total of several important metrics like: largest winner/loser, winning percentage, max drawdown, etc.
• And much more!

The best part about this software is that now I don’t have to take someone’s word that a trading technique works, I can test it for myself.

How Do You Actually Backtest?

I got this question quite a bit, so I decided to create a free course on how to do backtesting.  Fortunately, Rob’s course taught me everything I needed to know about getting started backtesting, but I realized that other people would not have the benefit of that instruction.

Click here to get my free course on how to do backtesting the right way.  I go through everything you need to do from tracking your results to installing software, to actually doing the testing.

I will also show you the best way I have found to transition from backtesting to live trading.  There are also a ton of tips, videos and step-by-step instructions so check it out!

Some of you are probably wondering WHY you should backtest.  Here is a video showing you why.  They are both 1 hour charts on the AUDJPY:

Hope that helps!
Hugh

P.S. – They raised the price recently, so be sure to get it before they raise it again!  I have worked out a special deal with the good folks at Forex Tester and you can save 10% by purchasing it through this link.

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1. Demo Trading and Back Testing