Event Driven Backtest

In event driven backtesting, the automated trading strategy is connected to a real time market feed, often with a lag of few minutes. The trade executions are completed on the paper/simulator, but not on the real exchange. The strategy receives the delayed market feed and then analyses this data to trigger an event, which will in turn generate a trading signal. These systems generally run in a continuous loop to receive events and handle them appropriately. Event Driven Backtesting can have sub-components such as historic data handler and broker simulator, allowing the backtesting to be performed in a manner very similar to the live execution. The drawback of such systems is that they have a complicated design and are more prone to internal bugs. Such systems are often written in programming languages such as C++ or Java.