I’ve been backtesting a strategy that seems almost too good to be true—consistent 10-15% gains per trade with minimal risk. But we all know that backtests aren’t reality. How much weight do you give to backtesting before trusting a strategy with real money? Have you ever had a backtest look perfect, only for it to flop in live trading?

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10-15 per trade with no risk sounds good. Sign me up.

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They all flop…no strategy has ever consistently maintained returns that high over a long period.

Stick with the only thing that has been tried and true: a low-cost ETF like VOO or VTI.

Plus, you’ll get hammered on the transaction fees and taxes from trading.

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Not necessarily, you don't even know what the strategy is

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Your strategy works in back testing based on a given set of conditions. Figure out how those conditions are likely to change looking forward rather than backward. Since any strategy is essentially an expression of a forward view, understanding how your strategy might fail can help you assess whether you actually want to use it.

Backtesting is one part of the process of building a strategy. If you’re testing a specific instrument you may need to branch out (IE - you’re testing on S&P500 only - may need to test on other indices, sectors, etc). To see if it’s that consistent because that instrument is that consistent. The step after is forward- live market testing. The backtest shows that initial management and criteria are solid. Forward testing (demo, b book, or live account) shows if it can handle current market conditions.

Good points, and expressed more succinctly than did I. OP, you definitely want to forward test with some paper trades using multiple instruments before declaring victory.

Backtesting can sometimes have an unconscious bias.

Something in your brain could have said "wow that is a great strategy" because it knew the historical environment. Then when you went to go test this strategy, it was probably confirming the parameters you already knew, thus acting as more of a confirmation bias.

Hi! I will forward test it as well. Measure twice cut once.

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