What Are Good Broker Neutral Tick Level Backtest and Trading Environments?

When it comes to developing and testing trading strategies, the quality of your backtest environment is critical. You want a tool that can accurately simulate your trading strategy in real-world market conditions, including the use of tick-level or level-2 (L2) data. This allows you to fine-tune your strategy before deploying it in live trading. In this article, we will explore some of the most recommended and flexible broker neutral tick level backtest and trading environments available today.

Ernest Chan's Recommendations

Based on Ernest Chan's recommendations, there are several great software options available for backtesting and immediate live trading, all of which include L2 backtesting capabilities:

Lime Strategy Studio

Does not require a brokerage account Very flexible, mostly US-based Includes both backtesting and immediate live trading

Deltix

Full hedgefund software, includes backtesting and trading Offers L2 data for backtesting/trading, though not confirmed

OpenQuant

Available from SmartQuant after QuantHouse stopped selling it Includes both backtesting and trading capabilities Supports various programming languages, including Java/Scala

Horizon Software

Includes backtesting and trading capabilities Uses Java/Scala for programming

These platforms stand out for their flexibility and the ability to handle L2 data, which is crucial for accurate backtesting and fine-tuning of trading strategies.

Understanding the Importance of Tick-Level Backtesting

Tick-level and L2 data backtesting are essential for a robust backtesting process. These types of data offer a more detailed and accurate representation of market activity, allowing you to:

Test your strategy against real-time market conditions Simulate the exact execution lags and price movements that you would experience in live trading Account for the bid-ask spread and other liquidity factors

By fully utilizing tick-level and L2 data, you can ensure that your backtest results are as close as possible to real-world performance, giving you confidence in your trading strategy.

Other Noteworthy Backtest Engines

Although we have focused on the software recommended by Ernest Chan, there are a few other notable backtest engines that you might want to consider:

Lime Strategy Studio

Known for its use of L2 quotes data, Lime Strategy Studio is a powerful tool for detailed backtesting. While it is part of Lime Brokerage, you can license it without an account at Lime. This makes it an attractive option for developers who prefer a broker-neutral environment.

Deltix

While primarily targeted at hedge funds, Deltix offers a comprehensive backtesting and trading solution that includes tick-level data. Though it is less clear if they provide L2 quotes specifically for backtesting and trading, their platform is known for its robustness and flexibility.

Quanthouse / Apama

These industrial-strength platforms are designed for large-scale and complex trading strategies. Quanthouse is a well-known name in the quantitative finance space, while Apama is part of the Progress Software group. Both platforms are powerful and can accommodate sophisticated backtesting and trading needs.

Conclusion: Selecting the right backtest environment is crucial for the development and refinement of your trading strategy. With options like Lime Strategy Studio, Deltix, OpenQuant, and Horizon Software, you have a variety of choices that can satisfy your needs for tick-level data and L2 backtesting. By carefully considering your specific requirements and the features offered by these platforms, you can choose the best tool for your trading strategy.