Discover how backtesting works in trading, its benefits, limitations, and why it's essential for evaluating strategy effectiveness using historical data.

Backtesting is an important aspect of developing a trading system. If done properly, it can help traders optimize and improve their strategies.

Backtesting is the process of applying a trading strategy to historical price data to see how it would have performed in the past.

I explain why backtesting can work well--the relationship of in-sample to out-of-sample performance--and why sometimes it presents major problems.

Many fund managers are implementing a process of “backtesting,” also known as a retrospective review, as a best practice to analyze the qualitative factors used in valuing an investment.

The emergence of option backtesting software gives investors a new bank of information that is helping them weave their way through the sometimes perilous waters of options trading.