How Professional Traders Actually Use Backtesting
In this segment, Adrian Reid clarifies that backtesting and optimization are fundamentally different processes in trading system development. He warns against the common mistake of loading a strategy into backtesting software and blindly running an optimizer to select the best‑looking parameter set, labeling this as poor backtesting that exposes the inherent limitations of the method. Instead, Reid advocates using backtesting as an investigative tool to deeply interrogate a strategy’s behavior, understand its strengths and weaknesses, and build confidence before committing real capital. By thoroughly examining performance through backtesting, a trader can identify potential problems early and address them, reducing the risk of losing money in live markets.
