Glossary · B
What is Backtest?
Running a strategy's rules over historical data to see what would have happened. Easy to get wrong without any visible error.
In context
A backtest is the process of running a strategy's rules over historical data to see what would have happened "if we had traded this way back then". It is the most common tool in trading research and one of the easiest to get wrong. Small mistakes in how a backtest is built can produce a result that looks excellent and is completely unreal.
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