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
- Does the Golden Cross Work? We Tested 72 Strategies
- Can AI Predict Stock Prices From the News? We Asked It 599 Times
- Does Buying the Dip Work? We Checked Which Dips
- Does Volume Confirm the Trend? Sometimes It Contradicts It
- Should You Buy Stocks After Good Earnings? Post-Earnings Drift, Tested
Related terms
All glossary terms. Educational content, not financial advice.