Portfolio Backtesting

Portfolio backtesting is a very complex and powerful tool, which often is sold as a separate product. We have included our portfolio backtester with MultiCharts in order to give you maximum benefits. Portfolio backtesting is very different from regular strategy backtesting because it looks at all instruments in your portfolio as one whole.

What is portfolio backtesting?

Portfolio backtesting means applying one or more strategies to many instruments at once—testing on historical data and gauging performance as if all symbols were traded with these strategies. Different symbols can even have different resolutions during the testing—one tick, three minutes, nine days, or others.

Use more than one strategy at a time

You can also apply more than one trading strategy during your portfolio backtesting. You can break up your symbols into groups, and each group can have its own strategy.

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For example, you could have one trading system that trades stocks and another that trades futures. The performance of each strategy will impact your overall portfolio performance.

Reference other instruments with ease

Your trading strategy can reference up to four other instruments in order to make a trading decision on any one tradable symbol. This opens new opportunities of testing strategies such as statistical arbitrage or pair trading.

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For example, let’s consider a pair trading strategy. Pair trading means that you buy one instrument and sell another at the same time, and vice versa. When one of the pair is bought or sold, your strategy needs to know exactly what’s going on with both symbols. If your pair is Google and Microsoft, you would enter GOOG as symbol one and MSFT as symbol two. Then you would add MSFT as data one and GOOG as data two. This way each instrument in the pair is actively referencing the other instrument—and you achieve complete synchronization.

Real-life constraints considered

Considering real-life constraints is critical for creating successful portfolio trading strategies. During portfolio backtesting, trading signals often need to be prioritized because there is not enough money in the account to place all orders. Your strategy might always buy the cheapest instruments first, or you might want it to always fill stock orders before futures orders.

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There are many constraining variables available, so you can make portfolio backtesting as realistic as possible. Initial capital, exposure, risk, and other parameters are all essential factors to consider.

Use scripts to define money management

Money management options can be easily changed through the portfolio backtester interface or by directly using PowerLanguage code.

Interactive portfolio performance report

MultiCharts’ portfolio backtesting report is an essential tool when evaluating how your strategies are doing. It is just like our regular performance report, but it features the ability to view breakdown by symbols or show a correlation matrix.

Optimize your portfolio in a couple of clicks

Portfolio optimization lets you find optimal parameters for each of your portfolio strategies—one at a time or all at once. Both exhaustive and genetic optimization methods are available in the portfolio backtesting engine.