ml4t-backtest

Event-driven backtesting engine for quantitative trading strategies with realistic execution modeling.

Part of the ML4T Library Ecosystem

This library is one of six interconnected libraries supporting the machine learning for trading workflow described in Machine Learning for Trading:

Together they cover data infrastructure, feature engineering, modeling, signal evaluation, strategy backtesting, and live deployment.

What This Library Does

Backtesting requires accurate simulation of order execution, position tracking, and risk management. ml4t-backtest provides:

• Event-driven architecture with point-in-time correctness (no look-ahead bias)
• Exit-first order processing matching real broker behavior
• Configurable execution modes (same-bar or next-bar fills)
• Quote-aware execution and marking with price, bid, ask, midpoint, and side-aware sources
• Position-level risk rules (stop-loss, take-profit, trailing stops)
• Portfolio-level constraints (max positions, drawdown limits)
• Cash, margin, and crypto account policies
• First-class trade, fill, and portfolio-state export for audit and downstream analysis
• 40+ behavioral knobs for framework-specific parity

The same Strategy class used in backtesting works unchanged in ml4t-live for production deployment.

Installation

pip install ml4t-backtest

Quick Start

from datetime import datetime

import polars as pl
from ml4t.backtest import Engine, Strategy, BacktestConfig, DataFeed

class SignalStrategy(Strategy):
    def on_data(self, timestamp, data, context, broker):
        for asset, bar in data.items():
            signal = bar.get("signals", {}).get("prediction", 0)
            price = bar.get("price", bar.get("close", 0))
            position = broker.get_position(asset)

            if position is None and signal > 0.5:
                shares = (broker.get_account_value() * 0.10) / price
                if shares > 0:
                    broker.submit_order(asset, shares)
            elif position is not None and signal < -0.5:
                broker.close_position(asset)

timestamps = [datetime(2024, 1, day) for day in (2, 3, 4, 5)]
prices = pl.DataFrame(
    {
        "timestamp": timestamps,
        "asset": ["AAPL"] * 4,
        "close": [100.0, 101.0, 103.0, 102.0],
    }
)
signals = pl.DataFrame(
    {
        "timestamp": timestamps,
        "asset": ["AAPL"] * 4,
        "prediction": [1.0, 1.0, -1.0, -1.0],
    }
)

config = BacktestConfig(initial_cash=100_000)
feed = DataFeed(prices_df=prices, signals_df=signals)
engine = Engine(feed, SignalStrategy(), config)
result = engine.run()

print(f"Total Return: {result.metrics['total_return_pct']:.2f}%")
print(f"Sharpe Ratio: {result.metrics['sharpe']:.2f}")
print(result.to_fills_dataframe().head())

Each Engine instance is single-use. Create a new instance for every independent run.

bar["price"] follows FeedSpec.price_col when you provide one, so the same strategy works for close-based bars and quote-aware feeds.

Risk Management

Position-level exit rules:

from ml4t.backtest import Strategy, StopLoss, TakeProfit, TrailingStop, RuleChain

class MyStrategy(Strategy):
    def on_start(self, broker):
        broker.set_position_rules(RuleChain([
            StopLoss(pct=0.05),
            TakeProfit(pct=0.15),
            TrailingStop(pct=0.03),
        ]))

Portfolio-level controls:

from ml4t.backtest.risk.portfolio.limits import MaxDrawdownLimit, DailyLossLimit

Framework Profiles

Built-in profiles configure the behavioral semantics used by major backtesting frameworks:

from ml4t.backtest import BacktestConfig

# Match VectorBT behavior (same-bar close fills, fractional shares)
config = BacktestConfig.from_preset("vectorbt")

# Match Backtrader behavior (next-bar open fills, integer shares)
config = BacktestConfig.from_preset("backtrader")

# Match Zipline behavior (next-bar open fills, integer shares, per-share commission)
config = BacktestConfig.from_preset("zipline")

# Match QuantConnect LEAN behavior (same-bar close fills, integer shares)
config = BacktestConfig.from_preset("lean")

# Conservative production settings (higher costs, cash buffer)
config = BacktestConfig.from_preset("realistic")

Each profile sets 40+ behavioral knobs, including fill timing, execution price, share type, commission model, and order processing. Current exact-match evidence appears below.

Execution Modes

from ml4t.backtest import ExecutionMode, StopFillMode

# Same-bar fills (VectorBT style)
config = BacktestConfig(
    execution_mode=ExecutionMode.SAME_BAR,
    stop_fill_mode=StopFillMode.STOP_PRICE,
)

# Next-bar fills (Backtrader style)
config = BacktestConfig(
    execution_mode=ExecutionMode.NEXT_BAR,
    stop_fill_mode=StopFillMode.STOP_PRICE,
)

Quote-Aware Execution

from ml4t.backtest import BacktestConfig, DataFeed
from ml4t.backtest.config import ExecutionPrice

feed = DataFeed(
    prices_df=quotes,
    price_col="mid_price",
    bid_col="bid",
    ask_col="ask",
    bid_size_col="bid_size",
    ask_size_col="ask_size",
)

config = BacktestConfig(
    execution_price=ExecutionPrice.QUOTE_SIDE,
    mark_price=ExecutionPrice.QUOTE_SIDE,
)

With QUOTE_SIDE, buys fill at the ask and sells fill at the bid when quotes are present. mark_price is configured separately, so you can trade on one source and mark the book on another.

Quote-aware runs also preserve the microstructure context in the result surface:

• result.to_fills_dataframe() includes bid/ask/midpoint/spread/size context
• result.to_trades_dataframe() includes nullable entry/exit quote summaries
• result.to_portfolio_state_dataframe() reflects the configured mark source over time
• result.to_predictions_dataframe() preserves the raw model/input surface for downstream diagnostics

Reproducible Config Snapshots

BacktestConfig is also the serializable backtest preset surface. You can keep input configs sparse, then persist the fully resolved config that actually ran.

config = BacktestConfig.from_yaml("config/my_backtest.yaml")
result = Engine(feed, strategy, config).run()

resolved_config = result.config.to_dict()
runtime_spec = result.to_spec_dict()
written = result.to_parquet("results/run_001")

The exported result directory includes:

• config.yaml for the replayable resolved config payload
• spec.yaml for the richer runtime snapshot with library version and realized run window

Use top-level feed in BacktestConfig for generic feed semantics and top-level metadata for user-defined provenance like input paths or strategy ids.

Commission and Slippage

from ml4t.backtest import BacktestConfig, CommissionType
from ml4t.backtest.config import SlippageType, SpreadConvention

config = BacktestConfig(
    commission_rate=0.001,         # 10 bps percentage
    slippage_rate=0.0005,          # 5 bps slippage
    stop_slippage_rate=0.001,      # Additional slippage for stop exits
)

# Or per-share (Interactive Brokers style)
config = BacktestConfig(
    commission_type=CommissionType.PER_SHARE,
    commission_per_share=0.005,
    commission_minimum=1.0,
)

# Or bar-only spread approximation in currency units
config = BacktestConfig(
    slippage_type=SlippageType.SPREAD,
    slippage_spread=0.02,
    slippage_spread_convention=SpreadConvention.FULL_SPREAD,
)

Multi-Asset Rebalancing

from ml4t.backtest import Strategy, TargetWeightExecutor, RebalanceConfig

class WeightStrategy(Strategy):
    def __init__(self):
        self.executor = TargetWeightExecutor(RebalanceConfig(
            min_trade_value=100,    # Optional: skip tiny dollar trades
            min_weight_change=0.01, # Optional: skip tiny weight changes
        ))
        self.bar_count = 0

    def on_data(self, timestamp, data, context, broker):
        self.bar_count += 1
        if self.bar_count % 21 != 1:  # Monthly rebalance
            return

        # ML predictions → portfolio weights
        weights = {}
        for asset, bar in data.items():
            signal = bar.get("signals", {}).get("prediction", 0)
            if signal and signal > 0:
                weights[asset] = signal
        if weights:
            total = sum(weights.values())
            weights = {a: w / total for a, w in weights.items()}
            self.executor.execute(weights, data, broker)

RebalanceConfig defaults both min_trade_value and min_weight_change to 0.0, so these filters are opt-in.

BacktestConfig() defaults to neutral costs: commission_type=NONE and slippage_type=NONE. Broker-specific fee models and synthetic slippage are opt-in.

Cross-Framework Validation

Profiles configure framework-specific execution behavior. The generated table below reports only claims supported by the retained release-candidate evidence.

Scenario claims use the retained release-candidate matrix. "Exact" appears only when every required scenario has zero canonical gap.

Profile	Pinned framework	Required scenarios	Evidence
vectorbt_strict	VectorBT Pro 2025.12.31	16/16 exact	scenario evidence
vectorbt	VectorBT OSS 0.28.2	15/15 exact	scenario evidence
backtrader_strict	Backtrader 1.9.78.123	16/16 exact	scenario evidence
zipline_strict	Zipline Reloaded 3.1.1	15/15 exact	scenario evidence

Large-scale claims are published only when a retained workload has zero canonical gap.

Profile	Pinned framework	Compared	Trade gap	Terminal value	Evidence
vectorbt_strict	VectorBT Pro 2025.12.31 (1305a1e19743)	225,844 trades	0	685179.007330	large-scale evidence

No large-scale claim is published for Backtrader, Zipline, VectorBT OSS, or LEAN without a passing retained artifact.

See validation/README.md for methodology and detailed results.

Release-gate commands:

# Fast parity contract gate (scenario 01 across vectorbt/backtrader/zipline)
ML4T_COMPARISON_INPROC=1 uv run pytest tests/contracts/test_cross_engine_contracts.py -q

# Full correctness runner (selected scenarios)
python validation/run_all_correctness.py --framework vectorbt_oss --scenarios 01,03,05,09
python validation/run_all_correctness.py --framework backtrader --scenarios 01,03,05,09
python validation/run_all_correctness.py --framework zipline --scenarios 01,03,05,09

Performance

Release performance evidence covers deterministic single-asset, 250-asset daily, quote-aware, rebalance, and partial-fill workloads. Each workload runs three times in a fresh child process. The 250-asset workload periodically enters and exits a 50-position portfolio. The evidence separates setup from Engine.run(), measures peak RSS over the whole child process, reports runtime and memory sample spread, and verifies retained financial-output checksums and counts. The dedicated instrument-free hotpath benchmark enforces the runtime regression limit.

Run the release baselines and the instrument-free feed regression check locally:

uv run python validation/performance_baseline.py --output release-performance-evidence.json
uv run pytest tests/benchmark/test_hotpath_benchmarks.py::test_optimized_feed_runtime_vs_legacy_baseline --no-cov

Workload definitions and expected checksums are retained in validation/performance_baselines.json. The project does not publish hardware-dependent runtime, throughput, memory, or cross-framework ratios as stable claims.

Documentation

• Getting Started — your first backtest
• Data Feed — price_col, quote columns, and feed wiring
• Strategies — strategy interface and templates
• Stateful Strategies — advanced event-driven patterns (Kelly sizing, pairs trading, circuit breakers)
• Execution Semantics — fill timing, ordering, stops
• Configuration — 40+ behavioral knobs
• Risk Management — stops, trails, portfolio limits
• Rebalancing — weight-based portfolio management
• Results & Analysis — trades, fills, equity, and Parquet export
• Market Impact — commission, slippage, and impact models
• Profiles — framework parity presets

Technical Characteristics

• Event-driven: Each bar processes sequentially with configurable order sequencing
• Causal lifecycle: Per-bar callbacks receive the current bar; on_prepare receives configuration but no future feed timestamps
• Configurable fills: Match behavior of different backtesting frameworks
• Quote-aware: Optional bid/ask/mid/size caches with side-aware market fills
• Parquet export: Trades, fills, equity, daily P&L, and config are serializable
• Type-safe: 0 type diagnostics (ty/Astral), full type annotations

Related Libraries

• ml4t-data: Market data acquisition and storage
• ml4t-engineer: Feature engineering and technical indicators
• ml4t-diagnostic: Signal evaluation and statistical validation
• ml4t-live: Live trading with broker integration

Development

git clone https://github.com/ml4t/backtest.git
cd backtest
uv sync
uv run pytest tests/ -q
uv run ty check

Known Limitations

See LIMITATIONS.md for documented assumptions:

• Bar data cannot identify the path or queue order of intrabar events
• Corporate actions, borrow costs, taxes, and currency conversion are not modeled
• The pre-stable strategy lifecycle still depends on the shared ml4t-live contract

License

MIT License - see LICENSE for details.