Backtesting Basics
Intro
Backtesting helps validate hypotheses if done carefully—watch for bias and data issues.
Step-by-step
- Use clean, gap-adjusted price data.
- Simulate execution costs, slippage, and realistic fills.
- Test across multiple timeframes and regimes.
GOLD example
Backtest a breakout system on XAU/USD with tick-aware slippage assumptions and realistic fills.
Common mistakes
- Overfitting parameters to a small sample.