Backtest data and venues

Data

Data provided for backtesting drives the execution flow. Since a variety of data types can be used, it's crucial that your venue configurations align with the data being provided for backtesting. Mismatches between data and configuration can lead to unexpected behavior during execution.

NautilusTrader is primarily designed and optimized for order book data, which provides a complete representation of every price level or order in the market, reflecting the real-time behavior of a trading venue. This provides the greatest execution granularity and realism. However, if granular order book data is either not available or necessary, then the platform has the capability of processing market data in the following descending order of detail:

1. Order Book Data/Deltas (L3 market-by-order):

   • Full market depth with visibility of all individual orders.

2. Order Book Data/Deltas (L2 market-by-price):

   • Market depth visibility across all price levels.

3. Quote Ticks (L1 market-by-price):

   • Top of book only - best bid and ask prices and sizes.

4. Trade Ticks:

   • Actual executed trades.

5. Bars:

   • Aggregated trading activity over fixed time intervals (e.g., 1-minute, 1-hour, 1-day).

Choosing data: cost vs. accuracy

For many trading strategies, bar data (e.g., 1-minute) can be sufficient for backtesting and strategy development. This is particularly important because bar data is typically much more accessible and cost-effective compared to tick or order book data.

Given this practical reality, Nautilus is designed to support bar-based backtesting with advanced features that maximize simulation accuracy, even when working with lower granularity data.

Venues

When initializing a venue for backtesting, you must specify its internal order book_type for execution processing from the following options:

• L1_MBP: Level 1 market-by-price (default). Only the top level of the order book is maintained.
• L2_MBP: Level 2 market-by-price. Order book depth is maintained, with a single order aggregated per price level.
• L3_MBO: Level 3 market-by-order. Order book depth is maintained, with all individual orders tracked as provided by the data.

The book_type determines which data types the matching engine uses to update book state and drive execution. Data types not applicable for a given book_type are ignored for book and price updates, though precision validation still applies and the engine clock still advances. Strategies always receive all subscribed data via the data engine regardless of book_type.