Backtesting ยท Lesson 3.1
What is a backtest?
A backtest replays a strategy's rules against historical data to estimate how it would have behaved. It is the cheapest, fastest way to pressure-test an idea before risking real capital.
What a backtest actually does
For each day in the chosen period, the simulator checks every stock in your universe against the strategy's buy rules, manages existing positions according to the sell levels, and tracks the resulting portfolio value.
What it is not
- It is not a prediction. Past behaviour is not guaranteed to repeat.
- It is not a substitute for understanding the strategy. A surprising backtest result usually means something is wrong, not that you have found gold.
- It is not a single number. Read returns, drawdown, exposure, and trade count together.
Create an account to try this in the live product.
Related
- Entry and exit rulesBacktesting
- Reading backtest resultsBacktesting