This simulator demonstrates how look-ahead bias can artificially inflate your backtesting results, creating false confidence in trading strategies.
Look-ahead bias occurs when a strategy uses information that wouldn't have been available at the time of trading, artificially improving results.
Common sources include:
Impact on backtesting:
The performance degradation formula shows how look-ahead bias affects real-world results:
Actual Return = Backtested Return × (1 - Bias Coefficient)
Where the Bias Coefficient represents the percentage of your returns that came from future information.
How to avoid it: