BackTesting, the Good Guy Or the Bad Guy?

On trading system developing, Backtesting is the process oftesting a strategy on a financial historical data. However a backtest don´trepresent necessarily the real performance of the system. It could easily made aoverfitting, changing the parameters of the system, optimizing the system, butnot realy outperforming because the parameters are overtrained to precisely thissituation, with a high performance imprecision. The process of the systemdesign needs a separate historical data for the data validation process.The process of Optimization, the quality of the data, theindicators accuracy, for example, are details that must be looked inside. Asystem response, observed on the backtest graphic can present a very high sensitivity,changing drastically the performance with few parameters changes, indicating animperfect optimization.The quality of data and of the mathematical models as wellas the process of optimization could talk more of a trading system than just abacktesting.