Your Trading Bot's Backtest Is Lying to You - Here Are the 4 Ways

A backtest for a trading bot can be misleading due to common bugs and overfitting. These bugs can be caught by running a walk-forward backtest and treating smooth equity curves as suspicious. Overfitting can be identified by a green-in-sample, red-out-of-sample performance flip. To avoid these issues, use a growing window for the backtest and be cautious of parameter combinations that perform well on one slice of history but poorly on another.