Top Free Backtesting Software for Strategy Testing [2025]

Backtesting software refers to the ability to test potential trading strategies using historical data. A free Forex backtesting software allows traders to test their strategies using historical data, refine strategy conditions based on historical data before using them in live markets. Past performance does not guarantee future results. 

In this full user guide, we will cover the software used for backtesting strategies and explore how to use it to assess and refine strategies under historical conditions. This material is for informational purposes only and not financial advice. Consult a financial advisor before making investment decisions.

Introduction to Backtesting

Before we define 'backtesting', it will be helpful to discuss the history of backtesting first. In 1980, a Forex backtest involved creating a list of trading conditions, identifying them on a chart and then manually writing the trade results in a log.  

Manual backtests were very time-consuming. However, technological advancements have now simplified the process. Traders can now transfer a list of trading conditions into algorithms that can do the backtest more quickly, while covering more markets and timeframes.  

However, there are some risks. Past performance is not a reliable indicator of future results. Just because a set of rules may have worked in the past does not mean they will work again in the future. This is where forward testing, understanding historical performance metrics and adapting to current market conditions are also useful to have in a trader's toolbox.

Why Backtest a Strategy

Backtesting has a range of benefits for Forex traders, including: 

• Statistical Insight: Forex backtesting allows traders to determine if their strategy worked in past market conditions.  
• Practice: Backtesting can help traders spot trading opportunities by looking at past price movements and recurring patterns. In other words, it helps traders develop their technical analysis skills. 
• Confidence: Backtesting Forex is useful to build confidence, as traders gain experience by testing strategies on past price information.  

With any backtest, it is also important to do a forward test to ensure strategies have not been overly optimised to fit past data. This is where a demo account becomes useful. With a demo account, trade virtual funds to test a strategy in realistic market conditions until you are ready to go live.  

How to Backtest a Forex Trading Strategy 

There are a variety of backtesting software platforms available in the market. Each Forex strategy tester has its way of evaluating Forex trading strategies. Forex backtesting can be broadly divided into two categories – manual and automated. 

Backtesting Forex Strategies Manually 

Being a manual Forex back tester involves a fair amount of work, but it is possible. In manual Forex backtesting, you look back for your trading setups and then write down the results. Some platforms allow you to replay bar by bar, like an FX replay, so that you can observe the price action and subsequent performance metrics along the way.  

Advantages of manual backtesting: 

• It can be performed by anyone. 
• As you execute every trade, you will develop an understanding of how your Forex trading software works. You will know what can be improved, and you can even develop an automated strategy later on. 
• Manual back-testing simulates live trading mechanisms, such as entering or exiting a trade, risk management, etc. 

Disadvantages of manual backtesting: 

• It takes a very long time. 
• You may have confirmation bias on a trade, as you can see what happens next before you make your decisions. 
• It's difficult to measure all the performance metrics available manually. 

Manual backtesting methods can be a good way to start before you proceed to use automated software. Using an Excel spreadsheet for backtesting Forex strategies is a common method in this type of backtesting. 

Backtesting Forex Strategies Using Excel 

Many traders believe that one shouldn't have to be a programmer or an engineer to backtest a strategy. This method takes us back to the very basics, which anyone can use. Spreadsheet programmes such as Excel are among the top ways to backtest Forex trading strategies for free. 

You need a publicly available source of data, such as 'date/time', 'open', 'high', 'low', 'close' or 'prices'. The time component is essential if you are testing intraday Forex strategies. To get the data, you can use Yahoo Finance, Google Finance or use the data from the Admirals MetaTrader trading platforms. 

In the field "Enter Symbol/Company Name," fill in the symbol for the currency you want to see the data for. In the "Quotes" field, you will find the option to get historical prices for the symbol. Enter the date range here. Scroll down to the end of the page and click "Download to Spreadsheet". 

Use the "Sort" option in Excel's data menu to prepare the data. Here's a look at one way to find the day of the week that provided the top returns. Suppose our strategy is "buy the open" and "sell the close." 

• Column A - Date Column 
• Column B - Open Price 
• Column C - Close Price 

Now comes the tricky aspect of using the formula that will provide the top results: 

• In Column D, we use this formula: = IF(WEEKDAY($A2,2)=D$1,$C2-$B2,""). This formula has to be copied across all columns from D to H. 
• ($C2-$B2) – Close Price minus Open price; the true part of the statement that gives us the profit/loss. 
• (") – The False part of the statement, in the form of double quotes, which doesn't give any result if the day of the week is unmatched. 

What the formula means is that if the day of the week (converted to a number between 1 to 5, which matches Monday to Friday) is the same as the days of the week in the first row of this column (D$1), then you will see the result accordingly. You can also choose to include average and sum functions at the bottom of the "Weekday" column to identify which day of the week would have been most profitable based on historical data, though past returns do not guarantee future results.  

This is a strategy for backtesting using the manual option. You can use many expressions and conditional formulae like this for testing Forex strategies. However, this method is tedious and time-consuming.  

Automated Forex Backtesting Strategies 

Automated backtesting involves the creation of algorithms that can automatically enter and exit trades on your behalf. Some of these algorithms, or trading robots, can be purchased online (there are free ones available), or you can hire a programmer to code your strategy.  

Both MetaTrader 4 (MT4) and MetaTrader 5 (MT5) offer automated backtesting tools from their built-in Strategy Tester feature. Both MT4 and MT5 are proven and secure electronic trading platforms, popular choices for trading the financial markets. 

Manual vs Automated Backtesting Comparison 

Top Forex Backtesting Software: MetaTrader 

The MT4 platform contains a 'Forex Simulator' that allows traders to rewind time on their charts and replay the markets on any particular day. Orders can be placed, modified, and closed like one would do under live trading conditions. 

Compared to other forms of Forex paper trading, trading on historical data can save a lot of time. The speed of the simulation can also be adjusted. 

Additionally, you can boost the trading capabilities of your MetaTrader platform by downloading the Admirals MetaTrader Supreme Edition plugin. This plugin offers additional tools such as technical analysis from Trading Central, real-time trading news, global opinion widgets, trading insights from experts, advanced charting capabilities, and more. 

How to Backtest on MT4 (MetaTrader 4)

After you download MT4, you need to open the main menu and go to the "View" section, where you will find the "Strategy Tester" option. Alternatively, you can press CTRL+R on the keyboard and press the 'tester' button. 

Some of the key features of the Strategy Tester are: 

• It is one of the most popular trading simulators, combining the charting tools of MT4, quality tick-by-tick data, and an economic calendar.  
• Offline charts can be used along with indicators, templates, and drawing tools. 
• You can download high-quality tick data from external sources. You can access almost 10 years of real tick data with variable spreads. 
• This strategy tester can be downloaded from MT4 to be used as a free Forex trading simulator app for Forex trading practice on MT4 Mac devices, too. 
• Multiple chart frames can be opened in one place. 
• Important news releases can be tracked during the simulation through the economic calendar. 
• This trading simulator allows access to all in-built and custom indicators on MT4.

Simulation can be saved to a file to be accessed later. Every chart is equipped with a button that allows you to move back bar by bar. Everything, including trades, pending orders, stop losses, take profits, trailing stops, and account statistics, can be restored. You can also save your trading history in Excel sheets for in-depth analysis.

This MetaTrader simulation software is one of the top ways to backtest Forex trading strategies, both offline and online. By default, it is locked in demo mode. Reports on EA (Expert Advisor) testing results have been significantly upgraded on MT4 recently. 

Traders can now analyse ratios such as the Sharpe ratio, the recovery factor, position holding times, and many other characteristics. Over 40 different characteristics can be analysed in the 'Strategy Tester' report. There are also balance and equity graphs that can ascertain the time distribution of profit/loss and positions taken over the course of weeks, months, and even years. 

Check out this video from our in-house analyst on 'How to Backtest a Trading Strategy using MetaTrader.'

Backtesting Performance Analysis 

Depending on the type of backtesting software used, traders can access a wide range of performance metrics, such as:

• Total Return on Equity (ROE): Returns, expressed in terms of percentage of the total equity invested.

• Total Profit and Loss (P/L): Total profits and losses generated by a strategy, expressed as a percentage of the invested equity.

• Total Gain/Loss Ratio: The ratio of how many trades resulted in gains and how many in losses.

• Annualised ROE: The total return likely to be generated by a Forex strategy over the entire calendar year.

• Volatility: What kind of market conditions were your strategies working in, uptrends, and downtrends?

• Risk-Adjusted Returns: Calculating your returns in relation to the risks involved within a strategy.

All these metrics provide you with insights into how your trading strategies have performed in the past. While this does not guarantee the same results in the future it can provide valuable insights to try and optimise risk management of a strategy. 

Factors Influencing Backtesting Results

The top backtesting software in Forex depends on certain variables that can affect the outcome of the entire process. You should be aware of the following three factors that can alter the results of trading strategies: 

• Data Quality and Source: The accuracy and reliability of price data are important in backtesting. It also has to be relative to your strategy. Remember that not all data is created equal in the OTC (over-the-counter) markets. Online Forex brokers and banks can have different price data at the same point in time. 
• Determinism: How will the results vary when the same strategy is applied to a data set several times? Backtesting strategies should be 100% deterministic. You should get similar results every time you backtest a Forex strategy for a defined data set. While this might be the ideal scenario, it doesn't always occur. 
• Logic of Trade Execution: How logical and realistic is the trade logic that is embedded in the backtester? Backtests are never the perfect representation of the real markets. You will be missing important factors like slippage, latency, rejections or even re-quotes. 

It is also important to consider whether you are using bar data or tick data. Tick data can allow near-perfect historical simulation of your data. This process is slower when including bar data.  

Please note that even the top backtesting software cannot guarantee future profits. Low liquidity is a frequent issue in the Forex markets. It is governed by various external factors and is very difficult to simulate. 

7 Tips When Using Automated Backtesting Strategies

1. Choose Reliable Free Forex Backtesting Software 

Use trusted platforms like MetaTrader 4 and MetaTrader 5 for automated backtesting. These tools offer robust backtesting engines, access to historical data, and free versions for beginners. 

2. Use High-Quality Historical Forex Data 

Always backtest with accurate tick or minute-level data. Free forex backtesting software that supports detailed historical data provides a more realistic condition, but the results of the simulation are hypothetical and may differ from live market performance. 

3. Avoid Overfitting Your Trading Strategy 

Don’t tweak your strategy excessively to fit past data. Overfitted strategies often fail in live forex markets. Use automated backtesting tools to validate ideas without curving results too tightly to history. 

4. Incorporate Realistic Trading Conditions 

Include slippage, spreads, and order delays in your simulation settings. Even the best free forex backtesting software won't reflect real-world results if you skip the realities of live trading.  

5. Run Multiple Backtests Across Different Forex Pairs 

Test your strategy on multiple currency pairs and timeframes to ensure consistency. Automated forex backtesting software allows quick strategy replication across instruments. 

6. Track Key Performance Metrics 

Monitor profit/loss, drawdown, win rate, Sharpe ratio, and other key indicators. Free backtesting tools often come with built-in analytics that help you measure risk-adjusted returns. 

7. Forward Test Before Live Trading 

Even if your automated strategy performs well in a backtest, forward test it in a demo environment. The majority of automated systems that have worked well in the past typically fail in a live trading environment. 

Final Thoughts 

Whether you're a beginner testing strategies manually or an experienced trader leveraging automated systems, Forex backtesting software can be useful in building more confidence in your analysis.  

However, while backtesting may support trader development, it does not guarantee profitable outcomes in live markets. Manual methods offer greater control and can be useful for learning, while automated backtesting software delivers speed and consistency, especially when paired with free backtesting platforms like MetaTrader 4 and MetaTrader 5. 

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