How to Manually Backtest Multiple Markets at the Same Time

Backtesting multiple markets at the same time has several benefits.

The short version is that you'll save time and you can test based on market correlations.

This process will be similar to backtesting multiple timeframes at the same time, but will require a couple of additional setups.

Backtesting multiple markets is easy with an automated strategy.

Just run the trading program against data from different markets.

But viewing multiple markets at the same time is not as easy with manual testing.

In this quick tutorial I'll give you the benefits and downsides of manual multiple market backtesting and exactly how to do it.

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Benefits of Backtesting Multiple Markets Simultaneously

If you already know about the benefits of backtesting multiple markets, skip down to the section on setups.

But if you aren't sure why you should do it, here are the top 2 reasons.

Save Time

First, testing multiple markets can save you a ton of time.

Let's say that you want to manually backtest a trading strategy on the EURUSD and the S&P500 at the same time.

Furthermore, let's say that testing each market individually will take you 2 days.

If you run both charts at the same time and take trades on both charts, it might only take 2.5 days to do your test instead of 4 days.

This is a huge benefit.

See Market Correlations

The other reason to backtest multiple markets at the same time is to see market correlations.

For example, a frequently talked about correlation is between the CADJPY and Oil.

Since Canada is a major oil exporter and Japan imports all of its oil, the price of oil can effect each economy accordingly.

As always, don't take my word for it, backtest it yourself.

There are many other market dynamics at play with regard to currency prices, so the price of oil isn't always going to be the biggest influence.

But if you want to test this, it can be tough to see the correlation (or lack thereof) if you are only backtesting one market at a time.

Having both charts side by side makes this easy.

Downsides of Backtesting Multiple Markets Simultaneously

Multiple market backtesting is not all sunshine and unicorns though.

Here's what you should be aware of if you're going to do this.

Loss of Focus

One potential downside is that you could miss some signals, if you have too many markets open at the same time.

So if you want to test on multiple markets, you have to be super focused.

It's really easy to miss trades when you have several charts going at the same time.

I would suggest not testing more than 3 markets at the same time…max.

Two markets is ideal.

Computer Slow Down

If you have too many markets open at the same time, this can also slow down your computer.

Your trading program will have to update the data for each chart and also calculate your indicators (if you're using any).

Depending on how powerful your computer is, and which backtesting software you're using, this might slow things down.

So be sure that you have a decent computer and software that can handle this.

The most important spec on a computer is going to be the amount of RAM you have.

Processor speed does contribute to the overall speed, but as long as you have a processor made in the last 5 years, you'll see way more gains from RAM.

At least 16GB is recommended, but 32 GB or more is ideal.

How to Setup a Backtest in Multiple Markets

Alright, now that you have some background on multi-market manual backtesting let's get into actually how to do this.

I've personally done this with NakedMarkets and Forex Tester, but this will work in a similar way in other programs.

It's not possible to do this in something like MetaTrader.

If your software cannot do this, I would highly suggest switching to NakedMarkets.

This software is much more optimized for multiple market backtesting than Forex Tester.

I'll use NakedMarkets for the rest of this tutorial because that's what I use.

Step 1: Download Historical Data

You're going to need some data to test with, so the first step is to go to: Tools > Data Center and download historical data for the markets you want to test.

NakedMarkets provides updated historical data for free, no subscription needed.

Step 3: Setup the Backtest

Once the data is loaded, it's time to add your charts and set them up.

Go to: File > New Backtest

Name your backtest and the starting balance for the account.

Then click Next.

The choose the markets you want to backtest. Be sure to select more than one market on this screen.

Click on Next.

Use the default settings on the last screen and click on Finish.

Now a window for each market will open.

Resize the windows to your liking.

If you need to add more windows, click on: File > Add New Chart and select the chart you want to add.

You'll only be able to add markets that you selected when you created the backtest.

Keep in mind that you can also have multiple timeframes for each market.

Simply add another chart for each market, then change the timeframe of the second chart.

You can also change the timeframe of each chart by clicking on the chart you want to change, then clicking on the timeframe buttons in the upper left corner of the screen.

Once all of your charts are setup, it's time to start backtesting!

Step 4: Press Play and Start Taking Trades

The hard part is done, now it's time to start testing.

Press the play button in your software and it will advance all of your charts at the same speed.

Take trades according to your trading plan.

Step 5: Review Your Results

Once you've completed a full round of backtesting, it's time to see how well you did.

A common mistake is to judge a trading strategy purely on its total return.

Professionals examine at all aspects of a strategy to identify its potential because most strategies won't have good results on the first try. 

There are 3 main questions that you should ask yourself when reviewing your backtesting results:

Can I possibly improve this strategy? This is usually possible when a strategy is near breakeven. Consider experimenting with your risk management or exits. Can I potentially trade this on different timeframes or in multiple markets at the same time? This can give you more trades, if lack of trades is your problem. Is the overall trend of account balance good? If your strategy wins consistently, but has a low overall return, then you might simply need to increase your risk.

Read more about how to optimize your strategies in this article.

Be willing to experiment with your strategy until you find something that works.

That's the beauty of backtesting.

You'll get a good idea of what works BEFORE you actually risk real money.

There is also a creative element, which makes it fun to try out new ideas that you come up with.

Conclusion

So that's why and how to manually backtest your trading strategies in multiple markets at the same time.

If you've been testing one market at a time, this can be a game changer.

It will allow you to find profitable trading strategies and eliminate losers faster.

Happy testing!

 

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