For Business

Backtesting & Statistics

Why Backtest Results Always Beat Live Results

A backtest beats the live account because it leaks nothing: the costs, the fills, the fit, the hand and the feed each take a share between the sheet and the account. This paper shows you the five leaks in five lines; the idea as a bucket with four holes; a 98.8-pip five-minute bar on the euro on 27 January 2026 where the tester's fill and the market's part company; the leaks in numbers for the example rule, from plus 150.3 to minus 52.2 on the two that can be counted; and the live Journal tab on your platform, where requotes and off-quotes are written as they happen.

Difficulty
Intermediate
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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The five leaks

The result on the sheet is nearly always better than the result in the account, and it is not one reason but five leaks. The costs: the spread and the slippage the tester left out, 1.5 pips a trade in this paper's example, where a pip is the fourth decimal place of the price. The fills: a price the tester assumed and the market did not give, inside a fast bar. The fit: numbers chosen on the bars they were then tested on. The hand: the trades skipped and the stops moved by a person the tester does not have. And the feed itself, which live has gaps and requotes the clean history does not. The plain 10:00 to 18:00 rule on the euro made 150.3 pips on the sheet for 2026 and minus 52.2 after the costs alone; the other leaks come on top.

A bucket with four holes

Picture a bucket with four holes. The water poured in at the top is the backtest, every pip the sheet says the rule made. What stands in the bucket is the live result, and it is always below the pouring by the sum of what runs out of the holes: the costs, the fills, the fit and the hand. None of the holes is a surprise and none is a fault in the water; they are the difference between a sheet and an account, and a trader who knows where each one is can size it before the pouring starts rather than measure it afterwards in the account.

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