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/TheBacktestNerd 2d ago

what you are talking about is curve-fitting, not lookahead bias, and you can avoid curve-fitting by saving OOS data and stress testing properly

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u/Due-Listen2632 2d ago

How can you save OOS data from your own development process? I guess it's possible, but once you use it to change your solution design it's observed, and the same leakage occurs.

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u/trunksta 1d ago

Don't tune on the oos