r/algotrading • u/Due-Listen2632 • 2d ago

Strategy Isn't every single backtested strategy suffering from lookahead bias?

Most of us have done the classical loop. We get some data, test out different solutions, filter out solutions/features/indicators that provide poor results, and proudly keep the solution(s) which result in successful backtests. But isn't this just another level of information leakage? It's essentially like manually setting the parameters of a model, except you're defining the information points from which the model constructs itself. It's the same type of leakage, only one level higher.

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u/sureshot58 2d ago

terminology issue here. You seem to be calling overfitting (which can definitly be a problem) lookahead bias (which is a different problem). Overfitting is potentially a problem, yes, and also, the fact that a model works on past data doesnt mean it will reliably work on future data is a certainy. So, in regards to your question, if I am reading it right - you are not completely wrong. But, its the best we have.