Simulation, Backtesting, and Look-Ahead Bias
A backtest is credible only when every decision uses information available at that simulated instant and when fills model the constraints of the historical market.
Planned model
Replay event time, receive time, decision time, and order arrival time. Toggle latency, queue position, spread, fees, missing data, and accidental future access.
Questions
- What information was observable at each decision timestamp?
- How are fills, partial fills, and market impact approximated?
- Which parameter choices were selected using the evaluation period?
Exercise
Audit a strategy loop for look-ahead, survivorship, fill, and timestamp biases, then design a train-validation-test protocol.