backtesting

Almost every strategy that dies in production looked great in a backtest. The backtest wasn't unlucky — it was wrong, in one of three specific, detectable ways. Here's each one, the exact test that catches it, and why your usual metrics never warn you. 1. Lookahead bias — the silent killer It's almost never a deliberate shift(-1) . It hides in subtle places: Structural indicators computed over th…

By Ajay Pawar This blog serves as an introduction to key concepts, but for a solid foundation in backtesting, it’s recommended to start with How to Backtest: Strategy, Analysis, and More. This will help you understand the fundamentals of testing, and analysing trading strategies before deploying them. Introduction Traditional backtesting assumes that optimising a strategy on historical data and v…

Cross Validation (CV) is not a novel topic, but from my experience as both a data scientist and front desk practitioner, it is a statistical tool often underappreciated and misused. I believe that innumerous bad trading ideas could have been discarded had they been handled with due statistical care. So this blog is both a cautionary tale and a quick reference to modern CV methods in finance. We w…