backtesting
Strategy replay analysis
Backtesting is evaluating a strategy by applying it to historical data to see how it would have performed.
The term is most common in finance, where traders backtest investment strategies against past market conditions before risking real money: The algorithm looked promising, but backtesting revealed it would have failed in 2008.
Also used in sports analytics and other predictive modeling.
Planned approach to goals
- returnsProfits from investments
- portfolioCollected works or assets
- risk managementIdentifying and minimizing threats
- drawdownReduction over time
alpha · beta · execution · slippage · transaction costs · entry · exit · signals
Previously gathered information
- performance analysisEvaluating how something functions
- simulationImitation of real processes
- optimizationMaximizing efficiency or performance
- overfittingExcess adaptation to samples
curve fitting · robustness · reproducibility · assumptions · time series · statistical significance · confidence interval
Finite problem-solving procedure
- modelRepresentation or paradigm
- metricsStandards for assessment
- Monte CarloProbability estimation through randomness
- varianceSpread around the mean
correlation · regression · machine learning · neural network · optimization · parameters · variables · distribution
strategy
Planned approach to goals
- returnsProfits from investments
- portfolioCollected works or assets
- risk managementIdentifying and minimizing threats
drawdown · alpha · beta · execution · slippage · transaction costs · entry · exit · signals · benchmark
historical data
Previously gathered information
- performance analysisEvaluating how something functions
- simulationImitation of real processes
- optimizationMaximizing efficiency or performance
overfitting · curve fitting · robustness · reproducibility · assumptions · time series · statistical significance · confidence interval
algorithm
Finite problem-solving procedure
- modelRepresentation or paradigm
- metricsStandards for assessment
- Monte CarloProbability estimation through randomness
variance · correlation · regression · machine learning · neural network · optimization · parameters · variables · distribution · probability
- forecastingforecast, prediction, prognosis, outlook, estimate
- model evaluationaccuracy, AUC, cross-validation, overfitting, precision
- Quant Tradingalgorithmic trading, high-frequency trading, trading bots, quants, arbitrage
- Risk Metricstail risk, downside risk, risk exposure
- trading technologyelectronic trading, algorithmic trading, trading platforms, high-frequency trading, real-time data
- Trading Toolstrading platform, watchlist, price alert, screener, scanner