# Backtesting software: test a strategy on real prices

> Free backtesting software for stocks, ETFs, and crypto perps. Test a strategy with dividends, funding, and costs counted, then paper trade it.

Written by [Tactfolio research team](https://tactfolio.com/about/editorial-policy.md), published 2026-10-16, updated 2026-10-16, data as of 2026-10-15.

Backtesting software shows how a trading strategy or a portfolio would have
done on past prices. Tactfolio backtests both on daily prices of US-listed
stocks and ETFs, with dividends reinvested and a cost on every trade. It also
backtests Hyperliquid crypto perps, such as BTC, on daily or hourly prices. It
is free, and you can look around without an account.

- Test a fixed mix, like 60% stocks and 40% bonds, or rules that change what
  you hold.
- Prices are daily and adjusted for splits and dividends. Every trade pays a
  0.05% cost.
- Each backtest shows growth, the deepest fall, what it held and when, and a
  benchmark over the same dates.
- A next-day-open line and a "Reality checks" table show how fragile a result
  is.
- A backtest is hypothetical. It can't tell you what happens next.

## What is backtesting?

Backtesting means testing a plan on past data, as if you had followed it at
the time. The SEC's investor site describes it the same way, and adds a
warning: back-tested performance
[is hypothetical and does not reflect actual performance](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-47).

A backtest answers questions like these:

- How much would $1 have grown?
- How far did it fall in the worst year?
- How often did it trade?
- Did it beat holding the S&P 500 over the same dates?

## How to backtest a trading strategy on Tactfolio

1. **Open the builder.** Go to the [builder](https://tactfolio.com/builder). You can look at four
   starter patterns and their last 10 years without an account.
2. **Add what you want to hold.** Add tickers, such as SPY for US stocks and
   IEF for Treasury bonds. Put them in a **Weight** block and set the split,
   such as 60% and 40%.
3. **Add rules if you want them.** An **If** block can switch holdings when a
   condition is true. A **Rank** block can hold the strongest few funds.
4. **Pick dates and a benchmark.** A benchmark is what you compare against,
   such as holding SPY alone.
5. **Read the results.** The backtest reruns every time you change a number.
   Save your strategy with a free account, and every save is kept.

The [getting started guide](https://tactfolio.com/docs/getting-started.md) walks through a first
strategy in about 10 minutes.

## What a Tactfolio backtest includes

Every backtest uses the same rules, so results are fair to compare. The full
list is in [what a backtest simulates](https://tactfolio.com/docs/backtests.md).

| Part of the test | What Tactfolio does |
| --- | --- |
| Prices | Daily prices of US-listed stocks and funds, adjusted for splits and dividends |
| Trade timing | Trades at the same day's close as the signal, plus a next-day-open line to compare |
| Costs | 0.05% (5 basis points) on every trade, the same for every strategy |
| Crypto perps | Hyperliquid perps on daily or hourly prices, with funding counted in the price. Backtest and paper or testnet only |
| Economic data | US data from the Federal Reserve Bank of St. Louis (FRED), usable in rules |
| Young funds | Optional [simulated history](https://tactfolio.com/docs/simulated-history.md) reaches further back, clearly labeled |
| Benchmarks | Any ticker you pick, over exactly the same dates |
| Reality checks | The same trades at higher costs, and the benchmark held at your level of risk |

## A worked example: dual momentum

Here is a real backtest, with the awkward part first. Gary Antonacci's
[dual momentum](https://tactfolio.com/strategies/dual-momentum.md) strategy grew less than holding the
S&P 500 over the ETF era. It fell less in its worst drop, though.

Each month, the strategy holds US stocks or stocks outside the US, whichever
did better over 12 months. If US stocks did worse than Treasury bills, it
holds bonds instead.

| Measure | Dual momentum (live version) |
| --- | --- |
| Backtest period | August 4, 2008 to October 15, 2026 |
| Yearly growth (CAGR) | 8.89% |
| Worst fall (max drawdown) | 33.72% |
| $1 grew to | $4.71 trading at the close, $4.43 at the next day's open |
| $1 in SPY grew to | $8.60 over the same dates |

Figures as of October 15, 2026, from the
[live strategy page](https://tactfolio.com/s/tactfolio/antonacci-gem), using daily prices with
dividends reinvested and a 0.05% cost per trade. These results are
hypothetical.

**CAGR** is the average yearly growth rate. **Max drawdown** is the biggest
fall from a high point to a later low. The next-day-open line is lower,
which shows that the result depends a little on trading at the exact close.

## Common backtesting mistakes

A backtest can fool you. These are the usual traps.

- **Testing too many versions.** Try enough rules and one will look great by
  luck. This is called **overfitting**.
- **Ignoring costs.** Rules that trade often can lose their edge to costs.
- **Using a short window.** Ten good years can hide a bad decade.
- **Looking ahead by accident.** A rule must only use prices it could have
  seen at the time. Tactfolio's engine never lets a rule see a later day.
- **Forgetting how it felt.** A 30% drop is a number in a table. Living
  through it is harder.

[Why past results mislead](https://tactfolio.com/docs/concepts/why-past-results-mislead.md) covers
each trap and how to guard against it. [How to read a backtest](https://tactfolio.com/docs/concepts/reading-a-backtest.md)
explains every number in the results.

## What Tactfolio does and does not do

| Tactfolio does | Tactfolio does not |
| --- | --- |
| Backtest fixed mixes and rules-based strategies on daily prices | Backtest options, forex, or crypto coins you buy and hold |
| Backtest Hyperliquid crypto perps on daily or hourly prices | Trade crypto with real money |
| Reinvest dividends and charge a cost on every trade | Test stocks during the day, or minute by minute |
| Show a next-day-open line and reality checks | Call a backtest a track record |
| Let you run a tested strategy on paper or with Alpaca | Work with any broker other than Alpaca |
| Hold leveraged and inverse ETFs like any other fund | Test short selling or margin borrowing |

## Try it on Tactfolio

Open the [builder](https://tactfolio.com/builder) and start from a pattern or a blank canvas. If
you would rather start from a tested idea, open one of the 62
[classic strategies](https://tactfolio.com/strategies/classics.md) and copy it. When a backtest looks
good, [paper trade it](https://tactfolio.com/paper-trading.md) to see how it does on new prices.

## Keep learning

- [Backtesting explained](https://tactfolio.com/learn/backtesting-explained.md): the idea in plain words, with the traps to avoid.
- [Max drawdown](https://tactfolio.com/learn/max-drawdown.md) and [Sharpe ratio](https://tactfolio.com/learn/sharpe-ratio.md): two numbers to read on every backtest.
- [Momentum strategy](https://tactfolio.com/learn/momentum-strategy.md): the idea behind the dual momentum example above.
- [Backtest a portfolio](https://tactfolio.com/trading-tools/backtest-portfolio.md) and the [CAGR calculator](https://tactfolio.com/trading-tools/cagr-calculator.md): free tools for a fixed mix and a yearly rate.
- [Best portfolio backtesting tools](https://tactfolio.com/comparisons/best-portfolio-backtesting-tools.md) and [Tactfolio vs Portfolio Visualizer](https://tactfolio.com/comparisons/tactfolio-vs-portfolio-visualizer.md): how Tactfolio compares.

## Common questions

### Is backtesting free on Tactfolio?

Yes. Everything is free while we build. Without an account, you can see the
starter patterns and every public strategy's backtest. To run your own
backtests and save them, you need a free account.

### How far back can I backtest?

It depends on the tickers you use. SPY prices start in 1993, and many funds
start later. A backtest begins once every ticker has prices. For some young
funds, simulated history can reach further back.

Crypto perps have less history. Hyperliquid's daily prices start with BTC in
August 2020, and hourly prices cover a much shorter time. Perps that track a
stock or gold can use simulated history from the asset they track.

### Why are my results different from another backtesting site?

Small choices add up. The usual causes are trade timing, trading costs,
whether dividends are reinvested, and how the Sharpe ratio is figured. Our
[FAQ](https://tactfolio.com/docs/faq.md) lists each one.

### Can I backtest a stock portfolio, not only ETFs?

Yes. Tactfolio backtests US-listed stocks and funds. You can mix single stocks
and ETFs in one strategy.

### Can I backtest crypto on Tactfolio?

Yes, through Hyperliquid perps such as BTC and ETH, on daily or hourly prices.
Crypto is backtest and paper or testnet only. A strategy holds either stocks
and ETFs or perps, never both. [Crypto backtesting](https://tactfolio.com/crypto-backtesting.md) covers
funding, bars, and history.

### Is a good backtest proof that a strategy works?

No. A backtest shows how rules would have done on prices that already
happened. Rules often do worse afterwards. Test on dates the rule was not
built on, and paper trade it before you use real money.

## Sources

- [Investor Bulletin: Performance Claims](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-47), U.S. Securities and Exchange Commission, Investor.gov, accessed 2026-10-16