How to Validate a Backtest: What the Algo Trading Community Actually Does
How to Validate a Backtest: What the Algo Trading Community Actually Does TL;DR Backtesting is easy. Validating a backtest — actually knowing whether your results mean something — is where most algo traders struggle. A recent discussion in the r/algotrading community surfaced this exact pain point, with traders sharing their personal validation workflows. The consensus is clear: a backtest that “looks good” is meaningless without rigorous out-of-sample testing, realistic assumptions, and a healthy dose of skepticism. If you’re building trading algorithms, this is the conversation you need to read. ...