Free Fundamental Backtesting and Stock Screening Software
Portfolio123 Backtesting of Value Strategy
Free Stock Screening and Backtesting Software
How can you determine if an investing strategy is good or not? One method is to use stock market backtesting software. Let me quickly explain why you might need to use one and where the best one is for free.
Two Types of Analysis
You just finished reading a book on how to make money in stocks. The strategy could be about dividends or income investing, value investing, or high-growth trading. While the theory seems to make sense, you are unsure if the strategy works in the real world. One way to test the strategy - or even develop your own ideas - is to use backtesting software.
The software may be based on:
- Technical analysis
- Fundamental analysis
Technical analysis is the use of indicators such as RSI, MACD, ADX, and Stochastics. These use complex formulas based on price and volume. Fundamental analysis is what an accountant does. This involves using ratios such as dividend yield, price-to-earnings, net asset value, and revenue per share. You will more commonly find technical backtesting software since it only requires price and volume data which is cheap and easy to come by. Fundamental analysis requires a lot of historical data that may not be easy to come by. Thankfully, there is a way for you to get both - for free!
Portfolio123 : Free Technical and Fundamental Backtesting
I have scoured the Internet looking for comparable alternatives but I find none. One name kept popping up over and over again - Zacks Research Wizard. So I used the two week free trial to find out what it was all about. At first it seemed like a pot of gold - it was so easy to make a scan that would earn 40%+ per year. But then I began to notice some problems. There was survivorship bias meaning that when a company was de-listed, it disappeared off the Zacks database like it never was. This artificially inflates gain and is not real world trading. Maybe they fixed this issue since last year - I don't know. I also found the interface too simplistic after only a couple of days. The robustness checks and statistical testing was by my standards. As well, the historical data was limited. When I asked about price it was in the hundreds per month...and even more if I wanted a set of watered down 'advanced tools'. I was not pleased with the value at all.
Now compare this to Portfolio123. First up, you can get unlimited access to the top tier for a free trail period. Use the link here to get 45 free days of use on any membership level (you get an extra long trial period through the Hubpages link. Alternatively you can use the code "HKURTIS"). They also have a 100% free membership level as well (*note added in 2013 - the total free version is no longer available but they do have a $49 per mont lite version. Sorry). The membership is about 1/10th the cost of institutional grade software and much less than the cost of Zacks. But how do the features compare?
Review of Features in Portfolio 123 Online Software
Here is only a surface review of what you will find:
- Strategy Building - Use predefined scans that range from famous investing styles like Warren Buffett, Benjamin Graham, Peter Lynch, and CAN SLIM. You can build your own scanusing over 550 different fundamental and technical analysis filters. Some of the data I cannot find anywhere else.
- Backtesting - Test the strategy out over the last 10+ years.
- Robustness Checking - Did you cherry-pick the perfect time to invest? The robustness check will put the strategy to test with over 500 random entry points in the last decade to see how it performs under all conditions. Impressive!
- Simulations - Run the strategy with different buy and sell rules - both technical and fundamental. You can also use a variety of stop-losses or hedging tactics. Put in realistic liquidity requirements, trading fees, and slippage. This will also generate buy and sell signals for your portfolio going forward.
- Model Portfolios - Build and track your portfolios online.
- Ranking - You can build or use an existing ranking model which grades stocks on whatever criteria you select. This is a superb feature that I could write an entire article on.
There are market timing models, a full suite of tools for ETFs and more. In my opinion, it is institutional grade software at a fraction of the cost - or even free depending on your selected membership. Of course, you do have limited functionality with the free membership but you still use the stock screening and backtesting on the trailing one year of data. After searching for investing software, I finally found Portfolio123 - and I have never been more satisfied. Give it a free try to you be the judge. It takes a while to learn the in-depth features but it is worth the time spent as it is a free online fundamental and technical backtesting software all rolled into one neat package.