Core concepts every trader should know
Short, practical explanations of the ideas that make backtesting trustworthy.
Backtesting basics
What a backtest is, what it can and cannot tell you, and how to read a performance report correctly.
Why slippage matters
How execution costs quietly erode returns, and why ignoring them produces misleading results.
Understanding drawdown
Maximum drawdown, its duration, and why it is often more important than total profit.
Sharpe & profit factor
How risk-adjusted metrics help you compare strategies fairly instead of chasing raw P&L.
Avoiding overfitting
Why a strategy tuned perfectly to the past often fails live — and how to test for robustness.
Trade management
Re-entries, hedges and adjustments — modelling how you actually manage positions.
Frequently misunderstood ideas
What does a backtest actually prove?
A backtest shows how a defined set of rules would have behaved on historical data, including its risk profile. It validates logic and exposes weaknesses — but it is not a promise of future performance.
Why do backtests beat live results?
Usually because the backtest ignored real costs (slippage, brokerage, taxes) or was overfitted to past data. A realistic, cost-aware engine narrows this gap significantly.
How long a period should I test?
Long enough to span different market regimes — trending, range-bound and volatile. A few years of data, tested across sub-periods, gives a more honest picture than a single favourable stretch.
What makes a strategy 'robust'?
A robust strategy performs reasonably across many parameter values and time periods, rather than spectacularly at one exact setting. Robustness, not peak return, is what tends to survive live.