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Test a trading strategy or a trading system (Excel and VBA) | Free template

Test a trading strategy or a trading system is a free template that show you how you can test a trading method that are designed to achieve risk-adjusted excess return on historical data and to evaluate the outcome.

Trading in shares, options and CFD's means a risk of losing money as compared to investments in government treasury bills or government bonds that are considered as risk-free investments. In order to achieve a risk-adjusted excessive return on the stock market you must either be lucky or have a temporal advantage over other investors in the stock market. A trading strategy or a trading system are designed to create a risk-adjusted excess return to the person that develops the method and such a strategy is only successful if there is some inefficiency in the market.

To get an idea regarding whether a trading strategy can generate risk-adjusted excess returns you must test the strategy through simulated orders based on historical data and then analyze the results. A test of a trading strategy on historical data does not mean that the same results can be achieved through real business in the future and trading strategies can also stop working after a while because more and more people use the same trading strategy.

A trading strategy consists of rules to take positions and rules to exit positions and these rules constitute the starting point for the test of a trading system. When the rules of a trading strategy is defined then the sample size is determined depending on the desired confidence interval and thereafter are the historical data required for the test collected. In the next step must positions to take and positions to be closed be simulated by placing all orders in an order book. In the final step are the yield and the risk of the trading strategy evaluated by comparisons to the risk-free rate and a market index.

A trading strategy that includes complex rules takes a long time to test with manual methods and the fastest way to test these trading strategies is to program macros using VBA in Excel to fill the order book. In this free template to test a trading strategy, we have created a module in VBA with two subroutines (macros) that are linked to buttons in the order book. When you press the button "Create Orders" this will fill the order book with the positions taken and when you press the button "Close Orders" this will fill the order book with dates and prices for the closing of positions.
Updated: 01/01/2015 | Created by

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Tags: trading decision making financial calculations