Test Your Trading Strategies at These Web Sites. Wouldn't it be great if you could devise a trading strategy, test it against historical data for five months, five years, whatever, and then let that system run on automatic for a while -- paper trading so you can see how it works?
In fact, software lets you do just that has existed for years. Problem is, the programs have been so clunky that only hardcore programmers could use them. Or else -- as I talked about in a column in March -- the software was locked away in the backrooms of investment firms. Now analytical trading software is beginning to creep onto the Web. Stock Backtest - Powerful Tool for Building and Backtesting Stock Trading Strategy. How does backtesting work?
When you create a stock screening strategy that contains all necessary criteria and the selected historical year for comparison, backtesting applies this information and simulates trades for every matched stock based on each day of the selected year. Any matching stocks will be put into your virtual portfolio and any that are not will be ignored.
Even if some stocks, however, do match the criteria, they will still be ignored if there are no vacant positions in the portfolio. Traders typically do not add a large number of stocks to their portfolio, because its purpose is to control risks (20-30 stocks generally suffice). MI Backtester.