Pro lessonUnderstanding Backtesting · 3/43 min read
Lookahead bias, survivorship bias and hidden trading costs
Three common reasons backtests look better than reality: using future data, testing only surviving coins, and ignoring fees, spread and slippage.
Even without overfitting, a backtest can quietly cheat. Here are three of the most common problems.
Lookahead bias happens when the simulation uses information that would not have been available at the time of the trade. It is often an accident in the code.
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