Backtesting in Trading: Definition, Benefits, and Limitations

Not accounting for real-world trading costs like slippage, bid-ask spreads, and transaction fees can paint an unrealistically rosy picture of a strategy’s profitability. Backtesting assists in evaluating options pricing models by simulating their performance using historical data. Positive outcomes from backtesting provide confidence in the model’s viability, allowing traders to tweak system inputs and optimize… Continue reading Backtesting in Trading: Definition, Benefits, and Limitations