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uBacktest docs

Common Pitfalls

Be Skeptical and Critical

If your backtests show consistent double or triple-digit returns, you might be unintentionally introducing flaws that inflate performance. Here’s what to watch out for:

1. Lookahead Bias

Using future data in your strategy, even unintentionally, makes your results unrealistic.

Example:
A moving average that incorporates future prices rather than lagging behind can give your strategy unfair foresight, making it seem far more effective than it actually is.

2. Survivorship Bias

If you’re only testing on stocks that have done well, your results will be skewed.

Example:
Backtesting only on today’s top-performing stocks ignores the ones that didn’t survive or flourish. This can lead to an overestimation of your strategy’s real-world success.

3. Trading Costs

High-frequency strategies may seem unstoppable—until you factor in trading fees and slippage. Even small costs can erode profits over time. While its not fun or inspiring, you can incorporate trading costs into your strategy.