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Backtesting, Replay and Paper Trading: What's the Difference?

Trading platforms offer several ways to practise or test before risking money: backtesting a strategy, replaying past markets, replaying your own trades, and paper trading. They answer different questions, and platforms don't always use the names the same way.

This guide explains what each method can and can't tell you, then uses a few products we've reviewed as short examples. It doesn't rank tools or recommend a way to practise. Where a term has no regulator definition, it says so and describes how the platforms we review use it. To compare specific tools, see where to go next.

Educational content only. This guide is not investment advice. None of the methods described here predicts or guarantees live trading results, and trading carries risk of loss.

Quick answer

  • Backtesting applies a strategy to historical data from periods when it wasn't actually used. It shows how the strategy would have performed on that data, not how it will perform.
  • Historical replay, as the platforms we review use the term, replays past market data so you can practise trading it by hand.
  • Trade replay, as those platforms use it, replays the market around trades you've already taken, for review.
  • Paper trading has no regulator definition we could find. Platforms use it for placing simulated orders without real money.
  • None of these is actual trading. US futures rules require firms that advertise hypothetical or simulated results to warn about hindsight and the absence of financial risk.

Four ways to practise or test

The four methods differ in what data they use, who makes the trading decisions, and what the result can tell you. Only backtesting has a regulator definition we could find; the other three rows describe how the platforms we review use the terms.

Strategy backtesting
DataHistorical data from periods when the strategy wasn’t actually used
Who places tradesNo real trades. The strategy is applied to past data; platforms differ on whether that runs automatically or by hand
What it can tell youHow a defined strategy would have performed on past data
Main limitationHypothetical results: prepared with hindsight, with no financial risk, and not actual trading
Historical replay (as the platforms we review use the term)
DataPast market data, replayed on the chart
Who places tradesYou, with simulated orders
What it can tell youHow you make decisions as past bars appear, at your own pace
Main limitationSimulated trading, not actual trading, and without financial risk
Trade replay (as the platforms we review use the term)
DataThe market around trades you’ve already taken
Who places tradesYou already did, before the replay
What it can tell youHow price moved around your own entries and exits
Main limitationLooks back at trades already made; it doesn’t test a new strategy
Paper trading (as the platforms we review use the term)
DataDepends on the platform
Who places tradesYou, with simulated orders instead of real money
What it can tell youHow you handle placing and managing orders before risking capital
Main limitationNo financial risk; whether simulated fills match live fills isn’t established

Strategy backtesting, and why hypothetical results can mislead

The SEC's marketing rule for investment advisers describes backtested performance as the application of a strategy to data from prior time periods when the strategy wasn't actually used, and treats it as one kind of hypothetical performance. That is the sense used here: backtesting applies a strategy to historical data from periods when it wasn't actually used. The definition doesn't say whether the test runs automatically or is stepped through by hand, and platforms differ on that.

What regulators require firms to disclose

US futures rules from the CFTC and the National Futures Association (NFA) require firms that advertise simulated or hypothetical performance to include a warning about its limitations. The CFTC's required statement says such results don't represent actual trading, that because the trades weren't executed they may under- or over-compensate for market factors such as lack of liquidity, and that they are designed with the benefit of hindsight. The NFA's required statement adds that hypothetical trading doesn't involve financial risk, and that no hypothetical record can fully account for it: for example, whether a trader could withstand losses or stick to a trading program through them.

These rules govern how regulated firms advertise results. They don't regulate your own backtests or practice. They are a useful description of what a backtest can't show, and they don't put a number on how far simulated and actual results can differ.

Example: how TradingView and TraderSync label it

TradingView lists Strategy backtesting with basic report metrics on every plan, including its free Basic plan, and Deep Backtesting on Premium and Ultimate. Which markets its backtests cover, and how they treat trading costs, isn't established in our review. TraderSync calls its rule-based version automated backtesting: on its Elite plan only, and documented for stocks, forex, and crypto, not futures. For two platforms whose backtesting tools work differently, see TradingView vs TrendSpider.

Practising on history: replay

We found no regulator definition of replay. As the platforms we review use the term, historical replay plays past market data back so you can practise making decisions on it; both platforms below let you place simulated orders as it plays. Unlike a backtest, you make each decision yourself. The results are still simulated rather than actual trading.

The names vary. TradingView's Bar Replay replays historical bars on the chart, on daily and higher intervals on every plan, with intraday history depending on the plan, and is listed separately from its Strategy backtesting. TraderSync's Market Replay is a simulator for trading through historical sessions, on every plan, with practice trades logged into its analytics; TraderSync's own pricing copy calls this "backtesting" in the sense of testing a strategy by hand. The same name can mean something different on another platform, so check what a feature actually does.

Some platforms are built around this kind of practice. For two of them, see FX Replay vs Forex Tester. For futures platforms with their own replay and backtesting tools, see Futures Charting Software.

For books on the chart-reading methods you might practise this way, see Technical Analysis Books.

Reviewing your real trades: trade replay

Trade replay looks backward at what you actually did. TraderSync's Trade Replay re-plays the market around trades you've already taken, which TraderSync describes as down to 250 milliseconds, and it is a different feature from its Market Replay. Because it replays trades you've already made, it's a review tool rather than a test of a new strategy. Other trading journals use similar names, and the same name doesn't guarantee the same feature; our trading journal comparison covers how four journals handle replay, practice, and backtesting.

Paper trading

We found no regulator definition of paper trading. As the platforms we review use the term, it means placing simulated orders without real money. TradingView, for example, offers free paper trading on every plan, including Basic. What market data a paper account uses, and how its simulated fills compare with live fills, depends on the platform and isn't established here.

Paper trading results are hypothetical too. As the NFA's required statement puts it for hypothetical trading generally, there is no financial risk, so a paper account can't show how you would handle real losses.

Same word, different feature

Feature names are a starting point, not a definition. Some examples from our reviews:

  • Edgewonk's Backtester doesn't test a strategy against historical market data. You describe a strategy idea and enter the theoretical outcome of each trade yourself, for two variations side by side, and Edgewonk graphs the results.
  • Edgewonk's Performance Simulator is described in its documentation in terms of losing-streak probabilities based on trade outcomes. It isn't established as a market simulation.
  • "Backtesting" on TraderSync can mean its Market Replay simulator, which its pricing copy describes as supporting backtesting by hand, or its separate automated backtesting on Elite.
  • "Replay" can mean replaying the market for practice, like TradingView's Bar Replay and TraderSync's Market Replay, or replaying your own past trades, like TraderSync's Trade Replay.

Trade replay, market replay, and automated rule-based backtesting aren't established in Edgewonk's documentation. See our Edgewonk review for what it does document.

Where to go next

These pages compare or review tools; this guide doesn't rank them.

How this guide was sourced

The regulator sources below were checked on October 1, 2026. The definition of backtesting and the limitations of hypothetical results rely on them; where no regulator definition was found, the guide says so and describes how the platforms we review use the term. Product examples follow our reviews: TradingView October 1, 2026, TraderSync September 25, 2026, and Edgewonk September 26, 2026. See our Methodology for how we research and verify.

Regulator sources