Research as a discipline
Good backtesting lives inside a good research process; without one, a researcher tortures the data until something fits and calls it an edge. These pages lay out the workflow professionals use — from generating and framing an idea as a testable hypothesis, to defining rules and choosing parameters honestly, validating, reviewing performance and improving without overfitting. The process is what keeps discovery separate from self-deception.
Research Process: The quantitative research process is the disciplined workflow that turns a trading idea into a validated — or rejected — strategy while guarding against overfitting and bias. Its stages are idea generation, framing the idea as a falsifiable hypothesis, defining explicit rules, selecting parameters with restraint, running a validation workflow (out-of-sample, walk-forward, robustness), reviewing performance honestly, and improving continuously. The point of the process is to keep genuine discovery separate from fitting noise.
Idea Generation
ResearchIdea generation is the first stage of the quant research process, in which a testable trading idea is sourced from an economic or behavioural reason …
Hypothesis Testing
ResearchHypothesis testing is the practice of stating a trading idea as a precise, falsifiable claim, defining in advance what result would reject it, so tha…
Rule Definition
ResearchRule definition is the stage that converts a trading hypothesis into fully explicit and unambiguous entry, exit and position-sizing rules, so that a …
Parameter Selection
ResearchParameter selection is the disciplined choice of a strategy's numerical settings, such as lookback lengths and thresholds, in a way that minimises de…
Validation Workflow
ValidationThe validation workflow is the ordered pipeline through which a candidate strategy passes, from in-sample development to out-of-sample testing, walk-…
Performance Review
ReviewPerformance review is the stage in which a validated strategy's results are judged honestly against a relevant benchmark and the original hypothesis,…
Continuous Improvement
ReviewContinuous improvement is the disciplined iteration of a strategy over its lifetime, changing one well-justified thing at a time and re-validating ea…