The most dangerous object in finance is a beautiful backtest.
With enough parameters you can fit any history. The curve goes up and to the right — and tells you nothing about the future.
Three rules we use against self-deception:
1️⃣ Plateau, not peak. We choose parameters in the middle of a wide stable area, not at the single best point. A peak is luck; a plateau is structure.
2️⃣ Random in-sample and out-of-sample months, different for every test — so the hard months cannot hide.
3️⃣ Live trading is the only final judge. A backtest is a hypothesis; a real account is evidence.
If you remember one thing: be suspicious of the best result, trust the stable one.
#backtesting #quant #crypto
With enough parameters you can fit any history. The curve goes up and to the right — and tells you nothing about the future.
Three rules we use against self-deception:
1️⃣ Plateau, not peak. We choose parameters in the middle of a wide stable area, not at the single best point. A peak is luck; a plateau is structure.
2️⃣ Random in-sample and out-of-sample months, different for every test — so the hard months cannot hide.
3️⃣ Live trading is the only final judge. A backtest is a hypothesis; a real account is evidence.
If you remember one thing: be suspicious of the best result, trust the stable one.
#backtesting #quant #crypto
