Backtesting
Testing a strategy on past prices, and how to read what comes back.
- What is backtestingBacktesting means running a trading strategy’s exact rules over past prices to see which trades they would have taken.
- Backtest vs live resultsA backtest has to assume how each order would have filled.
- OverfittingOverfitting is tuning a strategy’s rules so closely to one stretch of past prices that they describe that stretch, not anything that carries on.