Glossary

Forward test

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A forward test takes the finished strategy and lets it trade new, unseen market data — usually on a demo account first, then small live size. Because the data arrives after the rules were fixed, it cannot have been tuned to fit.

The gap between backtest results and forward results is one of the most informative numbers in algorithmic trading. A large gap usually means the backtest flattered the strategy: overfitting, unrealistic fills, or costs that were ignored.

Covered in depth in Lesson 04: Backtesting, ohne sich etwas vorzumachen.

Related terms

• Backtest — Running a strategy against historical price data to see how its rules would have behaved in the past.
• Overfitting (curve fitting) — Tuning a strategy so tightly to historical data that it captures noise instead of a repeatable edge.
• Demo account — A broker account with simulated money — the standard proving ground before any strategy touches real funds.