What is Backtesting?
Quick answer
Backtesting is testing a trading strategy against historical data to see how it would have performed. It can reveal a strategy’s past behavior, but past results do not guarantee future ones, and backtests can be over-fitted or ignore real costs. In copy trading, a leader’s real, broker-verified live record is stronger evidence than a backtest.
Backtesting is a way to check how a strategy might have done by running its rules over past market data. It is a useful research tool, but it is easy to read too much into it.
How backtesting works
You take a set of rules and apply them to historical prices, then measure the hypothetical results, such as returns, win rate, and drawdown. The limits matter: a backtest can be over-fitted to the past so it looks great but fails going forward, it may ignore real costs like spreads and slippage, and past performance never guarantees future results. A strategy that shines in a backtest can still lose in live markets.
Why it matters in copy trading
When you choose a trader to copy, a backtest is only hypothetical evidence. A real, broker-verified live track record, showing actual closed trades over time, is much stronger, because it reflects real fills, real costs, and real decisions under pressure. Be skeptical of leaders who lean only on impressive backtests or screenshots rather than a verified live record.
Frequently asked questions
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