The most important variable in any backtest: execution

A backtest assumes you can trade exactly as the rules say. Enter here. Exit there. No delay, no slippage, no partial fills. Perfect discipline.

But in real markets, execution is the great filter between theory and profit. It decides whether your “edge” survives contact with reality.

That perfect backtest signal? It might fire at 9:31 p.m., when spreads might widen.

The breakout entry? It could trigger during a flash of illiquidity. Even a few ticks of slippage can turn a profitable system into a losing one.

Execution also includes you - your discipline, reaction time, and ability to stick to the plan when trades go against you. Many “broken” strategies aren’t broken at all; they’re just poorly executed.

When you test, always ask: Could this actually be traded as shown? If not, your edge isn’t an edge - it’s a wish.

Make sure you know the slippage of your strategy. How do you know? Compare live trading results to your backtests.