The Best Way to Properly Backtest on Tradestation

Compile or Verify the Strategy

Whether coded yourself or built with Build Alpha, we must save the strategy in TradeStation’s development environment. To do so follow these steps

• View >> Development Environment
• File >> New Strategy
• Name the strategy
• Code your strategy or copy and paste from Build Alpha
• Hit F3 or Verify to save the strategy

How to Add a Strategy to a Chart

Ok, now that we have a trading system how do we view it on a chart? The next step to properly backtest on the TradeStation trading platform is to open a chart.

Step 1 Open a New Chart

In the File menu, head over to View >> TradingApp Launcher >> Chart Analysis. Alternatively, one can do File >> New >> TradingApp Window >> Chart Analysis.

Double-click on the prices to access the settings. You can adjust the date range, candlestick type, timeframe, and symbol. Alternatively, you can right-click on the chart and select Format Symbol to do the same.

Step 2 Insert Strategy

Now that our chart is set, we need to insert the strategy onto the chart. From the File menu you can Insert >> Strategy or you can right-click on the chart and select Insert Strategy.

Next, select your desired strategy. You should see the trades appear on the chart.

Step 3 Turn on and configure settings

Let’s make sure our strategy settings are correct. Right-click on the chart and select Format Strategies or double-click on one of the entry or exit arrows to open the settings menu.

To automate the strategy, one must

• check the box “Generate Strategy Orders for Display in TradeManager’s Strategy Orders tab”
• check the box “Automate execution using”
• select an account
• select a confirmation setting

Please note these steps are the same for simulated trading and live accounts. Always confirm which account you are signed into prior to automating anything!

Max Bars Back and sufficient market data

The trading software needs sufficient data to calculate whatever it is your trading systems do. TradeStation has a setting called “Maximum number of bars study will reference” but it is more colloquially known as “Max Bars Back”.

This setting instructs TradeStation how many bars to wait before the trading strategy should begin trading. If your strategy uses a 200-period simple moving average, then it would be wise to set the Max Bars Back to 201.

To find this setting, right-click on the chart and select Format Strategies. In the next window, choose the “Properties for All” tab and look in the lower left. After setting an appropriate value hit OK and then continue to hit Close on the Format Analysis Techniques & Strategies window.

This setting is meaningful regardless of timeframe, tick data, daily, weekly, etc. as TradeStation considers bars.

Advanced Automation Settings in TradeStation

We have now set up a simple strategy with simple settings. TradeStation has many more noteworthy settings. In the Properties for All window, there are three tabs across the top. Select the ‘Automation’ tab to see a new set of configurations.

Fill historical orders

The first option is to instruct TradeStation on what to do when your strategy logic generates an order, but the market does not give you a fill. The default setting is to change your limit order to a market order 15 seconds after the strategy logic generates an order (assuming no fill).

Multiple Strategies on the Same Symbol

The next option to enable is if you will have multiple strategies for the same symbol. TradeStation will make sure one strategy’s exit does not close out a position from another strategy if you select the “Allow multiple automated strategies on multiple charts using the same symbol” option.

Stop Orders

Finally, enable TradeStation to send stop orders to their own server. This is an underrated feature and worth explaining. If your TradeStation account is down, internet goes out, lose power, etc. while you have an open position then this may save you. TradeStation will notice stop orders from your strategy logic and house them on their server. If you lose power, no problem, your order is still live on a TradeStation Technologies Inc server.

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Viewing the Strategy Performance Report

How do we view our back test results? After loading the strategy on the chart we can view the Strategy Performance Report. To open the report you can either

• Hit “ALT” + “SHIFT” + “P”
• View >> Strategy Performance Report

The report is extensive and has many options. I will briefly describe them all below

• Performance Summary – shows all relevant performance metrics
• Trade Analysis – provides insights into streaks, run ups and drawdowns
• Trades List – list of all entries, exits, and P&L
• Periodical Returns – strategy returns broken down by day, week, month and year
• Performance Graphs – equity curves and various other visual displays
• Trade Graphs – more visuals to view trade results
• Settings – an overview of symbol, strategy, and system settings

You can also save or print this report in the upper left near the File menu. Reminder, backtest results are not indicative of future results.

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Importing Trading Strategies into Build Alpha

TradeStation is great but is missing many advanced tools professional system traders require or only has them in a limited capacity such as

• Monte Carlo Simulation
• Walk forward optimizer
• Portfolio mode

Luckily, the Strategy Performance Report can be saved to a csv or excel file and imported into Build Alpha. Build Alpha has a converter that can take these Strategy Performance Reports and import any strategy.