Glossary

Backtest

Testing a trading rule on historical data to see how it would have done.

In plain English

You write down exact rules for buying and selling, then replay them on years of past prices. The result is a simulation, not real trades.

Uncle Gary explains

A backtest is replaying last season's football games and announcing that your system would have predicted every result. Easy, once you know the scores. The real test is next season.

Why it matters for your money

It is very easy to fool yourself with a backtest. That is why we use control groups, include costs and correct for luck.

Where we tested it

Related terms

All glossary terms. Educational content, not financial advice.