Backtesting

Backtesting is the process of using historical data to see how a trading strategy or model would have performed in the past. It helps test whether a strategy appears viable, based on the idea that one that worked well before may work well again, while one that performed poorly may continue to do poorly.

It is like testing a football plan using old match videos. If the plan worked well before, people hope it may work again. If it failed before, that is a warning sign.