Backtesting

Backtesting runs a coded trading strategy against historical market data and records what would have happened, every order, fill, position, and the resulting profit and loss.

A good backtest is event-driven: it feeds the strategy one market event at a time and lets it react, the same way it would in live trading. It also models costs like spread and slippage, so the simulated fills resemble what a real order would get rather than assuming a perfect price.

Backtested results are hypothetical. They describe the past under a set of assumptions and are not indicative of future results.