Testing Chart Ideas: backtests and statistics (education only)

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Testing Chart Ideas: backtests and statistics (education only)" on The Future Market. Lesson 1: "Before you start, and from idea to testable claim".

What the lesson teaches:
- Education only. Testing is how you find out when an idea fails. It never makes an idea safe.
- This course assumes you finished course 5.10.2: you can build a simple indicator by hand, you wrote a rule down before testing, and you split data into in-sample and out-of-sample parts.
- A hypothesis is a claim you can check. A null hypothesis is the boring claim: "the rule does nothing special; results are what luck would give." You try to see whether the data is hard to explain with luck alone.
- A testable claim has: the exact rule (numbers, not adjectives), the data (market, dates, timeframe), what you measure (for example the price change 20 candles later), the costs and the pass/fail line written before you look.
- Vague: "Price bounces at support." Testable: "On the daily chart of market X, from 2015 to 2024, when the close is within 1% of the lowest low of the last 50 days, record the change in close 10 days later. Null: the average change is the same as for all other days."
- Baseline: always compare with something simple, such as the average change on all days, or a random rule. A rule that "makes money" in a rising market might only be riding the rise.
- Writing the rule first matters because rules chosen after seeing results are a known problem in the research (Park and Irwin, 2007, covered in course 5.10.2).

The exercise I'm working on:
Write one dated test plan with the five parts and a null hypothesis. Do not look at any data yet and do not place any trade.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
4. This is for learning only. Remind me to check with a licensed professional before I make a real decision about my own money, health or legal situation.

I'm a parent helping my child (about 8 years old) with a lesson called "Before you start, and from idea to testable claim" from the course "Testing Chart Ideas: backtests and statistics (education only)".

Here's what the lesson says:
Saying "my lucky socks help my team win" is not a test. A test says: "I will wear them for 20 games and count wins, and I will compare with 20 games without them." You decide the rules first. Then you look. And you accept the result even if it is boring.

The activity:
Write one dated test plan with the five parts and a null hypothesis. Do not look at any data yet and do not place any trade.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Keep it general and educational. This is not advice for a real situation.