Backtesting

Also called: historical testing

Running a strategy on historical data to estimate how it would have performed — the first step in strategy validation.

Backtesting reveals whether a strategy has historical edge before risking real money. It’s also the easiest place to lie to yourself — curve-fitting parameters until the equity curve looks great is trivial and meaningless.

Use out-of-sample data, walk-forward analysis, realistic spreads/slippage, and confirm any backtest result with forward testing on demo.