What is Look-ahead bias?
Look-ahead bias is when a backtest uses information that would not have been available at the moment a trade was taken. Common sources are filling a trade at a price from before the signal existed, using economic or company figures that were revised later, and indicators that redraw their own past. It makes results look better than anything a trader could have achieved.
Why Look-ahead bias matters
A test that peeks at the future can show a high win rate and a smooth curve for rules that have no edge at all.
Related terms
Lessons that use this term
- Look-ahead bias: when a backtest sees the future
- Survivorship bias: why testing only the winners lies
- What is backtesting