tablet and laptop showing technical analysis chart

Best Forex Backtesting Software For Beginners

There are many reasons why backtesting is such an integral part of your trading toolbox. Backtesting allows you to have a better grip on your strategies, and it also improves your overall profitability. But what are some of the best tools for someone who's just starting? In this list, you'll find four of the best forex backtesting software that are perfect for beginners.

MetaTrader 4/5


meta-trader-4-intellinvestors

The list starts with an application that you may not realize can also be used for backtesting.


That's right, the ever-popular MetaTrader 4 (MT4) and MetaTrader 5 (MT5). 


The MT4 is most commonly used for real-time trading, whether it'd be a demo or a real account.


It's licensed to most brokers so that they can provide a trading platform for their clients.

Pros

  • The great thing about this software is it usually is free for retail traders, and the only thing you have to do is to find a broker that will give you access to it.
  • It's also pretty easy to set up.
  • And your broker provides you the historical price data.

Cons

  • Since the actual platform is meant for real-time trading, backtesting would have to be done offline.
  • The mobile version of the MT4 or MT5 is not suitable for backtesting.
  • Another thing is that you don't get to save the progress of your backtesting session, so every time you log in to your account will be a blank canvas.
  • It also doesn't offer the same simulation experience as placing orders and getting subsequent results for you to analyze that the other software mentioned in this article provides.

Verdict

The MT4 is best for backtesting Expert Advisors (EA) or sometimes referred to as trading robots. It would be a cinch for the MT4 to backtest EAs, but it's slightly a hassle for manual backtesting. It would fit the budget of novice traders who have yet to appreciate the benefits of backtesting or those merely dabbling with backtesting.

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forex trading with a demo account intellinvestors


Backtesting With A Spread Sheet


constructing the simple moving average using excel

Here's another free application for you -- sort of.

If you have a spreadsheet software installed on your computer, what you only need is the historical price data, and you can find that on Yahoo Finance.


Once you downloaded the data, paste them on the spreadsheet, create a chart, and then add technical studies.

Pros

  • There are plenty of free spreadsheet applications other than Excel that's available online.
  • Backtesting using this method allows for highly customizable charts and charts that deviate from the common candle, bar, and line type.
  • Also, the data available on Yahoo Finance is pretty extensive. For example, the EURUSD price history dates back to 2003.

Cons

  • It takes time because you need to construct everything manually, including charts and even indicators.
  • The price data on Yahoo Finance is also limited to daily, weekly and monthly timeframes, so you might want to consider another data service.
  • Similar to the MetaTrader 4 and 5, you also can't place orders or simulate trading using the spreadsheet method, which is crucial for having a comprehensive understanding of your strategy.

Verdict

You are only going to enjoy this process if you genuinely enjoy crunching numbers on a spreadsheet software; otherwise, you are most likely going to strain over using this method. Spreadsheet backtesting is not practical for most beginners since it also requires mastery of how specific indicators are calculated, and that is not what most newbies are accustomed to.

Here's an example of how you can construct an indicator on Excel using price data downloaded from Yahoo Finance:


TradingView


eurusd chart

Ethereum Chart Feb 17 2020 (Source: TradingView)

TradingView is a trading platform that is gaining significant popularity because of its social sharing element.


This charting package is equipped with plenty of technical indicators, and traders can trade directly from it once they connect it with TradingView's selected brokers.

Pros

  • One reason why TradingView is a great choice for you is that it costs nothing to use it. Although there are options to upgrade the features of TradingView with a subscription, the free account will suffice what new traders generally look for.
  • Another advantage is that you can study multiple financial instruments, with varying quotes coming from different brokers.
  • There's also a wealth of technical indicators that are available within the platform.
  • Lastly, what is perhaps the most useful is that TradingView can control the speed of backtesting, which enables you to get a feel of actual trading.

Cons

  • The downside of backtesting with TradingView's free account is that it's limited to daily, weekly, and monthly timeframes. You would have to upgrade to either Pro, Pro Plus, or Premium to take advantage of lower timeframes.
  • You would also be bounded by the number of indicators that you can use simultaneously because TradingView's free account only allows up to three.
  • And despite having the control over backtesting speed, you can't place orders directly on the platform while running your test.

Verdict

Overall, TradingView's free account is still more than enough for backtesting. It's an excellent option that boasts broad capabilities not just for backtesting but for studying charts and price action comprehensively.

Here's a quick demonstration of how backtesting using TradingView works:

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Forex Tester 4


technical chart

Technical Chart (Source: ForexTester4)

Forex Tester 4 is an application that is developed to serve one goal: to backtest trading strategies.


Backtesting is not this software's secondary purpose like MetaTrader or even TradingView, so investing in Forex Tester is a clear commitment to backtesting objectives.

Pros

  • Traders who are familiar or have experience trading using the MT4 or MT5 will have no problem adjusting to Forex Tester because of its almost similar design.
  • The available assets to backtest on ForexTester are not limited to currencies -- there are also stocks, indexes, gold, and even cryptocurrencies.
  • Forex Tester also has the available tick data.
  • Adding to this simulated experience is the capability to place orders on the platform itself. This is beneficial because it quantifies your backtesting results with virtual dollar figures.
  • Lastly, if you are moving towards backtesting EA in the future, Forex Tester also fulfills that purpose, so it's an all-in-one kind of software where you can do manual and automated backtesting.

Cons

  • You have to download each historical data from servers, which takes a bit of time, and it comes as a separate purchase price from the original software.
  • The application is also not compatible with Mac, so Apple users will have to use a Parallels Desktop software to access Forex Tester.
  • And its demo version is very limited when it comes to historical data.

Verdict

As mentioned, Forex Tester 4 is a commitment for traders who truly want to perfect, improve, or at least understand their strategies' performance. The investment in Forex Tester should be taken as a fee for achieving long-term consistency through backtesting.

Here's a quick look at Forex Tester:

Forex Tester 4 Review

If you want to learn more about Forex Tester, we have a much more comprehensive review and you can access it by clicking the button below.


So, there you go those are the four backtesting software that beginners can utilize to perfect trading strategies. If you like this post, let us know by leaving a comment on the comments section below.

3 thoughts on “Best Forex Backtesting Software For Beginners

  1. I am a brand new investor.  Upon coming across your article, I had no idea what it meant for me.  I read every word and a bit hard for the ultimate beginner to get a grasp. Sort of bummed that there isn’t one for the new-bee and free so that you can get your feet wet and not lose your ass.  I appreciate your article in that it does point out some things I hadn’t thought about.  I thank you for that and hope to get better acquainted with this so that I actually will need the backtesting software.

  2. To be honest, I actually like the mt4 platform and I actually take my trades on this platform due to the flexibility. On a Kore serious note, I also like the mt5 specifically for the more advanced features but I prefer the mt4 for the ability to accumulate previous data and using it

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