Backtesting Software Market Size, Share, Growth, and Industry Analysis, By Type (Cloud, Hybrid, On-premise), By Application (Shares, Foreign Exchange, Futures, Other), Regional Forecast To 2031

Updated On: 29 April 2024

Backtesting Software Market Report Overview

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The global backtesting software market size is expanded rapidly in 2021 and market is expected to generate substantial revenue by 2031, exhibiting a high compound annual growth rate (CAGR) from 2021 to 2031.

In modeling, the process of testing a predictive model against previous data is referred to as "backtesting." It is a special kind of cross-validation that is applied to previous time periods. It is used in a trading strategy, investment strategy, or risk modeling to estimate how well a strategy or model would have performed if it had been used in the past. Backtesting has historically only been done by professional money managers and large institutions because it is expensive to get and use detailed datasets.

One of the most important aspects of improving a trading system is back testing. It can assist traders in optimizing and developing their strategies, identifying any technical or theoretical flaws, and boosting confidence in their strategy before putting it into action on the real-world markets if performed and interpreted correctly. Due to technological advancement and the growing use of back testing by international traders and investment firms, the backtesting software market experienced strong global growth. Institutional investors frequently find themselves forced to the backrest in order to evaluate risk due to the large amounts of money at stake.

COVID-19 Impact: adoption of remote working Increased the Demand for advanced software

Due to improved performance, adaptability, and responsiveness, backtesting software has seen an increase in demand since the COVID-19 outbreak. The pandemic had supported the reception of computerized reasoning into versatile applications. Backtesting market had used artificial intelligence to make its processes better and more user-friendly. Additionally, manual tasks were automated and programs were reviewed with the help of some artificial intelligence technologies. Uneven long-term payments, complexity, financial exchange instability, difficulties in providing end-user support, and difficulties in maintaining the additional security were major obstacles for the company. Consequently, during the pandemic, these difficulties had an effect on software production in some way. The backtesting software industry had adopted continuous innovation, developed new line-of-business apps, and developed digital resilience to combat the pandemic. Other majors included virus detection, artificial intelligence assistant, and supercomputing power. As a result, the COVID-19 pandemic has had some positive effects on the market.

Latest Trends

"New Product Launches to be a trend for the market"

Back testing is thought to be an essential tool for financial traders, as they wouldn't even consider entering the markets without it. Back-Testing strategies primarily operate on the premise that trades that have performed well in the past will do so again. Product launches by key players furthers accelerating demand for backtesting software market. Trading System Lab (TSL) added their machine learning capabilities to the QuantFactory cloud backtesting suite in June 2020, according to QuantHouse, a global provider of end-to-end systematic trading solutions that also include innovative market data services, an algorithm trading platform, and infrastructure products. The launch of Historical data On-Demand, a product of Iress and a global provider of end-to-end systematic trading solutions that includes innovative market data services, an algorithm trading platform, and infrastructure products, was announced in October 2019 by QuantHouse, a part of Iress. This product is intended to significantly accelerate the research, development, and backtesting phases of any trading strategy.

Backtesting Software Market Segmentation

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• By Type Analysis

According to type, the market can be segmented into cloud, hybrid and on-premise.

• By Application Analysis

Based on service, the market can be divided into shares, foreign exchange, futures and other.

Driving Factors

"Increasing Use of software by Investment Firms to Fuel Market Demand"

Backtesting models can be used in trading strategies by institutional traders and investment firms with the human and financial resources they maintain. Additionally, when significant sums of money are at stake, institutional investors frequently have to sit on the sidelines to evaluate risk.

Backtesting software provides a wealth of useful statistical information, including Net profit or loss, volatility measures, averages, exposure, ratios, annualized return, and risk-adjusted return. This, in turn, is anticipated to support the expansion of the market for backtesting software.

"Expansion of back trading to propel market growth"

Emergence of independent web-based back testing platforms is anticipated to provide lucrative opportunities for the leading vendor in market, as back trading is becoming more widely used. Further, increasing uncertainty and volatility in market will boost backtesting software market growth.

Restraining Factors

"Risk of Over Optimization to Impede Market Expansion"

Backtesting can occasionally lead to what is known as over-optimization. In this case, performance results are too closely tied to the past to be as accurate in the future. In the coming years, it is anticipated that this factor will impede market expansion. Additionally, back testing is not always the most accurate method for determining a trading system's effectiveness. Strategies that worked well in the past sometimes don't always work well in the present. This, in turn, may impede the global expansion of the market over the coming years.

Backtesting Software Market Regional Insights

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"North America to lead the market due to the rapid adoption of technological advancements in the region"

North America holds the leading position in backtesting software market share due to technological advancement and the large presence of potential market players in this region. Mergers and acquisitions and key industry developments by major players further adding fuel to growth of market in this region.

Key Industry Players

"Market Expansion Is Being Driven by Key Players Adoption of Innovative Strategies"

Prominent market players are making collaborative efforts by partnering with other companies to stay ahead of the competition. Many companies are also investing in new product launches to expand their product portfolio.

The top key players in the market are MultiCharts, Deltix, QuantHouse, SmartQuant, AlgoTrader, TradeStation Group, AmiBroker, FXCM, Wealth Lab, Axioma, Trading Blox, NinjaTrader Group, RightEdge Systems, Build Alpha. The strategies to develop new technologies, capital investment in R&D, improve product quality, acquisitions, mergers, and compete for the market competition help them to perpetuate their position and value in the market. Besides, collaboration with other companies & extensive possession over market shares by the key players stimulates market demand.

List of Market Players Profiled

• MultiCharts
• Deltix
• QuantHouse
• SmartQuant
• AlgoTrader
• TradeStation Group
• AmiBroker
• FXCM
• Wealth Lab
• Axioma
• Trading Blox
• NinjaTrader Group
• RightEdge Systems
• Build Alpha

Report Coverage

This report examines an understanding of the backtesting software market’s size, share, and growth rate, segmentation by type, application, key players, and previous and current market scenarios. The report also collects the market’s precise data and forecasts by market experts. Also, it describes the study of this industry’s financial performance, investments, growth, innovation marks, and new product launches by the top companies and offers deep insights into the current market structure, competitive analysis based on key players, key driving forces, and restraints that affect the demand for growth, opportunities, and risks.

Furthermore, the post-COVID-19 pandemic’s effects on international market restrictions and a deep understanding of how the industry will recover, and strategies are also stated in the report. The competitive landscape has also been examined in detail to provide clarification of the competitive landscape.

This report also discloses the research based on methodologies that define price trend analysis of target companies, collection of data, statistics, target competitors, import-export, information, and previous years’ records based on market sales. Moreover, all the significant factors which influence the market such as small or medium business industry, macro-economic indicators, value chain analysis, and demand-side dynamics, with all the major business players have been explained in detail. This analysis is subject to modification if the key players and feasible analysis of market dynamics change.