Backtesting Foundations
Simulating a strategy on history — done right, it is a microscope; done wrong, a mirror.
Lessons
- What Is Backtesting?Replaying your rules across years of data to see how they would have done. The promise and the peril.
- The Anatomy of a BacktestUniverse, signals, entries, exits, costs — the moving parts every honest backtest must define.
- In-Sample vs Out-of-SampleBuild on one slice of history, test on a slice you never saw. The discipline that catches self-deception.
- Data Quality & AdjustmentsSplits, dividends, bonus issues and bad ticks — why dirty data quietly ruins backtests.
- Modelling Costs & SlippageThe gap between the backtest fill and the real one. Ignore it and your edge evaporates live.