Why Backtests Fail in Live Trading
Separating signal failure from fill assumptions and accounting errors, so the gap between backtest and live is explained rather than blamed on costs.
Key ideas
A return gap between backtest and live trading does not by itself show whether the signal, the fill assumptions, or the accounting is at fault.
Keep a frozen decision replay, an actual-fill reconstruction, and a broker reconciliation as separate ledgers, and never substitute actual fills into the replay.
Treat an unknown fee as pending rather than zero, never count fees or spread twice, and keep the decision policy frozen while diagnosing the gap.
Read the full essay
Written by Wayland Zhang, founder of Dnalyaw.