I’m wondering how big is the difference between live results and hypothetical results? If for instance hypothetical results promises 100% return p.a how much I can expect from live results? I know that nobody can’t give a precise answer, but many people must have experiences and rough estimates. Is there someone who has done previously mentioned comparison with few trading systems in the past year? Would be good to hear experiences.
Gen3 (OEC). Expect 15% less for intraday systems…
It really depends so much on on the trading style of the particular system as well as on the differences between different brokers.
For instance, and using extremes to illustrate the point, if a system makes 1 stock trade in a year using no margin (for which interest would be payable) then the live results will probably be almost exactly the same as the hypothetical. On the other hand, if the system makes 10 trades a day then the trading costs and slippage will ensure that live and hypothetical diverge very much.
Or, if a system depends on split-second timing then you can also expect much greater differences than with systems with more long-term trades where timing is not so crucial. But at least if the system is auto-traded then hypothetical fills will be based on real fills so this reduces the timing related divergence.
Regards,
Dean.
