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Correctness of Backtest Engines

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  • Robert Low
  • Stanislaus Maier-Paape
  • Andreas Platen

Abstract

In recent years several trading platforms appeared which provide a backtest engine to calculate historic performance of self designed trading strategies on underlying candle data. The construction of a correct working backtest engine is, however, a subtle task as shown by Maier-Paape and Platen (cf. arXiv:1412.5558 [q-fin.TR]). Several platforms are struggling on the correctness. In this work, we discuss the problem how the correctness of backtest engines can be verified. We provide models for candles and for intra-period prices which will be applied to conduct a proof of correctness for a given backtest engine if the here provided tests on specific model candles are successful. Furthermore, we hint to algorithmic considerations in order to allow for a fast implementation of these tests necessary for the proof of correctness.

Suggested Citation

  • Robert Low & Stanislaus Maier-Paape & Andreas Platen, 2015. "Correctness of Backtest Engines," Papers 1509.08248, arXiv.org.
    • Handle: RePEc:arx:papers:1509.08248
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    File URL: http://arxiv.org/pdf/1509.08248
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    References listed on IDEAS

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    1. Stanislaus Maier-Paape & Andreas Platen, 2014. "Backtest of Trading Systems on Candle Charts," Papers 1412.5558, arXiv.org.
    2. Peter P. Carr & Marcos Lopez de Prado, 2014. "Determining Optimal Trading Rules without Backtesting," Papers 1408.1159, arXiv.org, revised Sep 2014.
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    Cited by:

    1. D. Th. Vezeris & C. J. Schinas & Th. S. Kyrgos & V. A. Bizergianidou & I. P. Karkanis, 2020. "Optimization of Backtesting Techniques in Automated High Frequency Trading Systems Using the d-Backtest PS Method," Computational Economics, Springer;Society for Computational Economics, vol. 56(4), pages 975-1054, December.

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    1. Stanislaus Maier-Paape & Andreas Platen, 2014. "Backtest of Trading Systems on Candle Charts," Papers 1412.5558, arXiv.org.

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