Reader Email: Backtesting Software

I figure that posting the email conversations I have with readers may help other traders out there. I know that websites and blogs don't always answer all the questions you may have. While I don't have a fraction of all the answers to each question out there, I'll do my best to give whatever of my experience I think may help. Feel free to send emails or post comments. Grab my contact info here.

(Note: If I post something you send that you'd rather not have posted, let me know, and I'll remove it. Also, if you'd rather not have a question posted, give me the heads up in the email itself.)


Flip

Hi,

My name is Flip, I'm going to compete with you in the trading competition
you're setting up.

I'm interested in backtesting some strategies in both (single) equities and
in index futures. Do you recommend any good (and cheap) software for this.
I got some of my data from Bloomberg and used Matlab to program, but the
major problem I have is:

- programming is matlab is not the quickest way to get things done!
- if I want to make a backtest on the S&P 500 stocks I have to take into
account all the changes made to the index over time (thus avoiding
survivorship bias). I have tried doing this using Bloomberg but it is
extremely time consuming to fetch the companies that went bankrupt or
merged...

Looking forward for the competition!

Regards

Flip

Reply:

Hey Flip,

I've used Ninja Trader (http://ninjatrader.com) to do backtesting.
It's free to use for backtesting historical information (it costs
money if you want to use a strategy in the open market). From what I
remember it will actually download whatever historical information you
ask it to from Yahoo Financial (daily historical information only).

I know Dogwood uses Stock Fetcher
(http://www.stockfetcher.com/ui2/index.php) for some of his
backtesting. For free they let you test out some of the features. For
a reasonable price they give you access to many more features. I know
he's also started testing out Wealth-Lab
(http://www.wealth-lab.com/Home/Default.aspx) and I think there's a
way to get a free demo. Otherwise I think the software costs quite a
bit.

Good luck to you in the contest! =D

-CP

PS:

I have also used MetaTrader 4 and your standard programming languages (C++ and Python mostly) to do backtesting. I wouldn't recommend those to the beginner because of the extra effort and programming required, but they are also an option.