Backtesting Pitfalls: Why Your Strategy
It's early morning. Your algorithm just captured a 25-tick move on ES futures while you were still asleep. You check your backtest results—perfect equit...
backtesting mistakes is an essential topic for every trader looking to improve their futures trading. It's early morning. Your algorithm just captured a 25-tick move on ES futures while you were still asleep. You check your backtest results—perfect equity curve, 300% annual return. Then you remember: you haven't actually tested this strategy against real market conditions. Your backtest looked great, but your live trading account is now down 22% after just three weeks. This scenario happens to 97% of day traders, according to a University of São Paulo study that tracked every individual who began day trading in Brazil. This article covers backtesting mistakes in detail for traders looking to improve their results. Overfitting is the excessive adjustment of a strategy to historical data, capturing random fluctuations rather than generalizable patterns. It creates a strategy that appears brilliantly profitable in backtests but collapses in live trading because it memorized past noise instead of learning real market dynamics.