Why Does Backtesting Matter?

Backtesting matters because it turns a market idea into a question that can be checked against historical data.

Instead of relying on a persuasive chart or a market saying, a backtest makes the dates, sample, calculation, and past outcomes visible.

What can a backtest show?

A backtest can show how a rule behaved in past periods: the number of positive and negative outcomes, average result, drawdown, and weak years. It helps identify where an idea worked and where it failed.

What can it not show?

It cannot prove future performance. A result can be affected by a small sample, changing market conditions, outliers, or rules adjusted too closely to past data.

Use it to challenge an idea before you rely on it. Read How to Read Backtests and Why Market-Level Backtesting Matters for the full methodology.

Historical outcomes do not predict future returns and are not investment advice.