Backtesting is one of the biggest keys to success in trading.
If you don’t backtest your trading strategy, you won’t know if it works or not.
Using the right backtesting software is essential to ensuring that you’ll get accurate data and backtest as efficiently as possible.
So in this review, I’ll analyze the NakedMarkets backtesting software so you can find out if it will help you take your backtesting game to the next level.
Why Backtest?
Backtesting is the best way to figure out if a trading strategy has an edge or not.
There is no other way to do it.
This is similar to how gold prospectors drill core samples or how car companies test new models. If you don’t do some testing, you won’t know if it’s worth digging for gold or if a car will work properly.
Too many new traders trust what they hear on the internet and never backtest their strategies.
…and that’s why most traders fail.
So if you want to have confidence in your trading strategy and know if it works or not, then you HAVE TO backtest.
Backtesting is done with dedicated backtesting software.
Now that you understand this, here’s what you’ll need to have in your backtesting software.
What to Look for in Backtesting Software
If you’re new to backtesting, then I’ll quickly share with you what I look for in quality backtesting software, based on my 20+ years of trading experience.
Ease of Use
Clunky software is a pain.
Luckily, most backtesting software nowadays is pretty easy to use and is usually patterned after MetaTrader, or similar programs.
So you usually won’t have too much trouble with most software solutions.
But it’s always best to download a free demo to test out the software you’re looking at, before you buy it.
Ability to Test Different Markets
A lot of backtesting solutions are very targeted to one market, be it stocks, Forex, futures or crypto.
There is some merit to that idea because there are certain nuances to each market.
But in general, it’s best to get software that can test multiple markets.
This means that you won’t have to buy separate software if you want to expand into other markets in the future.
Updated Historical Data
Another key benefit to look for is the ability to get updated historical data inside the program.
There are 2 things to look for:
- Data that goes back as far as possible
- Data that can be easily updated
One of the biggest issues with a lot of backtesting software is the lack of historical data. Many packages have data from a couple years ago, but not any more than that.
An example of this is TradingView. While I love TradingView for many of it’s capabilities, it’s notorious for not having enough historical data on the lower timeframes.
So you want to be sure that any software you use has the 2 data capabilities above.
Ability to Upload Historical Data
This is important because a program may not have the market you’re looking for, or you may want to backtest data from other brokers.
Therefore, look for software that has the ability to add custom historical data to existing markets and the ability to add new custom markets.
For example, you may want to backtest some of the smaller cryptocurrency markets. Data for these markets is usually not included in many software packages.
However, if you have the ability to create a custom market and upload the data for it, you’re good to go.
Accuracy
It’s very important that backtesting software includes the spread in its calculations.
I’ve used software that doesn’t include the spread and that resulted in many of my tests being profitable, but not actually working in the real world.
In addition, the historical data has to be clean and come from reputable sources. It’s best if the data comes directly from the broker or from a reputable data provider.
Another area to pay attention to is if the software is actually executing trades properly on the screen. Sometimes the software doesn’t record the trades correctly.
This usually isn’t an issue, but I have seen problems with a couple of software packages that I tried in the past.
Analytics
Last but not least, the software must have detail analytics on your backtesting results.
Most backtesting software has basic statistics like win percentage and total return.
But you need much more than that, in order to understand if the strategy you tested works or not.
Here are some of the metrics that you should look for:
- Maximum number of losing trades in a row
- Max drawdown (most software requires you to export to a spreadsheet)
- Monte Carlo risk analysis
- Breakdown of % return by month / year
- Hour / day of week / month analysis
- Breakdown by symbol
- Number of trades
- MAE / MFE
- Risk of ruin
Does NakedMarkets deliver in these areas?
Let’s find out by looking at the benefits and downsides…
Benefits of NakedMarkets
Most backtesting software out there has the basic functions: place trades, set pending orders, track stats on wins and losses, and a performance graph.
I’ve reviewed some other solutions in the past here.
So for starters, NakedMarkets has all of the basic features that you would expect in most backtesting software:
- Updated historical data
- Ability to upload custom historical data
- Test different markets
- Ease of use
- Accuracy
- All trading capabilities
But really sets NakedMarkets apart are the following benefits.
Manual, Semi-Automated and Fully Automated Backtesting with No Coding Required
This is by far the biggest benefit of this software.
All of the no-code solutions that I’ve used in the past did not work. Sure, I could test a few simple ideas, but I could not create complete trading strategies.
NakedMarkets is the first no-code solution that I’ve used, that actually works well.
On top of that, you can backtest manually, semi-automated and fully automated.
I’ll explain what I mean.
Manual backtesting is when you enter trades manually, just like in live trading. Nothing new there, most backtesting software has this feature.
However, you can also build Rules that allow you to essentially create building blocks that can help speed up your backtesting, or to collect into a completely automated trading strategy.
It’s really cool and I haven’t seen anything like it…before or since.
To see it in action, watch this video.
Full Analytics Suite
Another area where NakedMarkets sets itself apart is its analytics.
It has a complete analytics suite called Statistics Center, that will give you tons of information on your backtesting.
There is probably more information available than most traders will need.
But it’s reassuring to know that it’s there…if you need it.
Profit and Loss Calculated in Percentages
This might be a minor point to some, but it’s a big benefit to me.
NakedMarkets reports your backtesting results in both dollars and percentages.
Having this information is much more useful than just dollar amounts, especially if a test goes well and your account balance starts to grow.
One situation where this is super useful is if you’re not increasing your position size as the account grows.
This is easy to spot if the results of each trade are reported in percentages.
Free Updated Historical Data
One of the biggest benefits of NakedMarkets is that it provides updated historical data, at no additional charge.
There is a wide range of markets that you can backtest in this software, as seen below. It also provides historical data that goes pretty far back, allowing you to test over multiple market cycles..
Not only is the historical data provided, they have data available from multiple brokers.
Most other software solutions out there charge a monthly fee for historical and updated data. That’s how they make their money.
Other software may have a cheap upfront cost, but they get you on the recurring data charges.
But NakedMarkets has a one-time cost, with no recurring charges, which makes it a great deal.
Now that you know about the benefits, I’ll address the downsides.
Downsides of NakedMarkets
There are only 2 downsides that I’ve experienced, or have been reported to me.
First, this is complex and fairly new software so there have been a few minor bugs in the software. This is expected for any software of this complexity.
However, they have always fixed the issues that I’ve reported and have even created a couple of custom solutions for me. You can see the proof on their forum.
The other potential downside of NakedMarkets is that their customer support has been reported to be little slow at times.
I’ve personally never had any issues with them, but some people have reported it.
I also think that some people in the public are unreasonable when it comes to contacting customer support. For some reason, they think that they should get a response in 5 minutes.
I’ve experienced this on my site.
In the case of NakedMarkets, I don’t know if people reporting slow support are just being impatient or if support really is slow sometimes. All I know is that in my experience, they have always gotten back to me in a timely manner.
But if you do have to contact them, remember that they have a small team, so they will get back to you as soon as they can.
You can also contact them via their forum.
Final Decision
So if you’re looking for a backtesting solution that will help you backtest manually, partially automated or fully automated, then this is the best option I’ve come across.
There are several backtesting software solutions out there, but none of them come close to the benefits of NakedMarkets.
…and I’ve been using backtesting software since 2009, so I’ve seen a lot.
Learn more about NakedMarkets here.