Backtesting & risk
How to structure a trading backtest
A backtest applies explicit rules to historical observations under stated execution assumptions. Its value depends on those assumptions and the quality of the underlying data.
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AI QUANT BASE / BACKTESTING
Backtesting & risk
Read historical results in context: data timing, transaction costs, benchmarks and validation.
Use these methods to make research assumptions visible and historical results easier to inspect.
Backtesting & risk
Look-ahead bias and information timing
Look-ahead bias occurs when a historical decision uses information that would not yet have been available at that decision time.
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Backtesting & risk
Transaction costs and slippage in a backtest
Transaction costs reduce the difference between gross and net outcomes. A useful model states which fees and execution effects it includes.
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Backtesting & risk
Out-of-sample testing and strategy changes
Out-of-sample testing evaluates a frozen research specification on observations that were not used to choose it. The split and the change history matter.
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Backtesting & risk
How to read a strategy performance report
Start with the measurement basis, then examine the return path, drawdown and costs together. A headline return is not enough to compare strategies.
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