Stock backtesting tends to be more prone to distortion compared to digital currency strategy backtesting, primarily due to several characteristics of the stock market that are often absent or have less impact in the digital currency market. Here are the detailed explanations:
First, the T+0 trading system in the stock market requires investors to wait for at least one trading day after purchasing stocks before selling them. However, quantitative traders may overlook this rule during backtest portfolio, simply assuming that all transactions can be executed immediately. This assumption often does not hold true in actual situations, as factors such as market liquidity and price fluctuations can affect the immediacy of transactions. Therefore, backtest results that ignore the T+0 system tend to be distorted and cannot accurately reflect the strategy's performance in the real market.
Second, the stock market's trading hours are discontinuous, with opening and closing sessions as well as midday breaks. During these periods, stock prices do not change, resulting in discontinuous price data. This discontinuity poses challenges for strategy backtesting, as quantitative traders need to address data gaps during these timeframes. In contrast, the digital currency market typically operates 24/7, eliminating such issues.
Lastly, stock trading generally occurs in lots, with one lot equaling 100 shares. This trading unit limits investors' flexibility. In contrast, digital currencies can be divided nearly infinitely, allowing investors to purchase any amount of digital currency they desire. For example, on aijiebot's digital currency quantitative trading platform proving free backtesting, each transaction is accurate to four decimal places, ensuring the accuracy of backtest data. This differs from other platforms like TradingView backtesting and Thinkorswim backtesting. The difference in trading units also contributes to the distortion in stock backtesting. During the backtesting process, quantitative traders may not accurately simulate the trading unit restrictions in the stock market, leading to discrepancies between backtest results and actual market performance.
In summary, factors such as the T+0 trading system, discontinuous trading hours, and trading unit restrictions in the stock market contribute to the higher distortion in stock strategy backtesting compared to digital currency backtesting. Therefore, special attention should be paid to these factors during stock strategy backtesting to ensure the accuracy and reliability of the backtest results.