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 OK 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?

Other Forex Backtesting Software Solutions

Dont 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 benefits:

The program is very affordable   It is just a one time fee, NO monthly billing.  At the time of this writing, it only costs $159.  I wouldnt 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 sign up for my backtesting course, you can get it for $179.  Just sign up via the box at the bottom or to the right >>

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. Automatic upgrades when new versions are released. 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 dont have to take someones 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, Robs 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:

As you can plainly see, backtesting will give you much more practice than sitting in front of the charts for weeks or months.  There is no replacement for actual live trading, but backtesting can give you the confidence to take (and stick with trades) and an idea if the method you are trading has a chance of being profitable or not.

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 itperiod.