Break the Backtest.
A smooth chart can hide weak assumptions. Change three of them and watch this synthetic strategy’s result change.
Causal mode: each position uses only the preceding session’s return.
— Gross (before costs)— Net (after costs)
View the complete data table
| Session | Market return | Position | Gross equity | Net equity |
|---|
Read the assumptions first.
The demonstration uses a fixed synthetic return series, not an investment product or a student performance claim. In causal mode, the sign of yesterday’s return sets today’s position (+1 or −1). The biased mode sees today’s return before choosing the position.
Commission and slippage are charged on changes in position: moving from −1 to +1 trades two units. The final position is closed, including its cost. Net equity compounds daily returns after those charges. Gross equity omits them. Financing, market impact, taxes and realistic execution are omitted.
Use the exercise to ask better research questions: what was knowable at the time, what does each trade cost, and would another researcher reproduce the result?