Backtest vs forward test. If you only remember one thing from my posts, let it be this 👇
Backtest = you run your rules on old data. You already know what happened, so it's very easy to (accidentally) tune the rules to the past.
Forward test = you freeze the rules and let them run on days that haven't happened yet. No edits, no "oh that one doesn't count".
I've had backtests showing +30% that turned into −21% on data they'd never seen. Happens to everyone who's honest enough to check 🙃
That's why I post the forward test every day. Good days, flat days, red days. It's the only number I trust.
#trading #backtest #crypto
Backtest = you run your rules on old data. You already know what happened, so it's very easy to (accidentally) tune the rules to the past.
Forward test = you freeze the rules and let them run on days that haven't happened yet. No edits, no "oh that one doesn't count".
I've had backtests showing +30% that turned into −21% on data they'd never seen. Happens to everyone who's honest enough to check 🙃
That's why I post the forward test every day. Good days, flat days, red days. It's the only number I trust.
#trading #backtest #crypto