NinjaTrader Backtesting: Analyzing historical performance of your strategy

Backtesting: Evaluating Strategy Performance in NinjaTrader 8

Backtesting is a crucial feature in NinjaTrader 8, enabling traders to assess the performance of their trading strategies using historical market data before implementing them in live trading.

In this tutorial, we'll explore how to use the backtesting feature in NinjaTrader 8.

First, please make sure you've downloaded NinjaTrader 8. You can see the Ninja Trader 8 download instruction here.

Performing Backtesting on Your Strategy

Step 1: Open a New Chart Window and Choose an Instrument.

  • Go to 'New' -> 'Chart.'
  • Select the desired instrument (e.g., AMZN for Amazon).
  • Then you can set your Custom range in the Properties Panel

Step 2: Access the Strategies Menu.

To run a backtest, you'll need a strategy for it. Just follow these:

  • Right-click on the chart.
  • Select 'Strategies' from the context menu.

Step 3: Choose a strategy, e.g., we're using the Sample Moving Average Crossover Strategy, which came with NinjaTrader

  • Double-click on the 'Sample Moving Average Crossover' strategy to add it to the Configure panel.
  • In the Properties section on the right-hand side, set the moving average lengths to 10 and 25.
  • You can keep other settings at default; they normally work fine out of the box.

Step 4: Enable the Strategy and Run Backtest

  • Ensure the 'Enabled' button is checked.
  • Click 'OK' to start the backtest.

The result could be as below:

Understanding Backtesting Results

The backtesting result provides valuable information about your strategy's performance over historical data. Let's focus on the key factors to consider:

What you can see from the chart:

  • The chart displays the two simple moving averages, connecting the beginning and ending points of trades.
  • The green dotting line indicates winning trades, while the red dotting line represents losing trades.
  • The closed position details show the entry and exit points and the resulting profit or loss.

To access a summary of the backtest performance:

Right-click on the chart, then select 'Sample MA Crossover,' and go to 'Historical.'

Let's focus on the main numbers:

  • Total profit earned during the four-year period is displayed (e.g., $113k).
  • The drawdown amount (e.g., $24k)
  • The total number of trades executed (e.g., 36)
  • The average trade profit (e.g., over $3k)

Analyzing Strategy Performance with the Analysis Window:

  • Right-click on the chart.
  • Choose 'Analysis.'
  • Observe the equity curve, represented by a rising green line, indicating overall strategy success and limited drawdowns.

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