When you first start trading a strategy live, the very first thing you should do is compare the backtest to the live trades.
This is not a step you should put off until later.
Do it as soon as possible after the first day you have live trades.
Some traders like to let some time pass at this stage to “collect more data.”
But that’s a missed opportunity.
You can get answers so quickly when you compare your trades to your backtest, even on an average day for your trading system.
Doing this lets you shift your path to confidence in your trading system into hyperdrive.
When comparing to the backtest, there are lots of data points you can reconcile. (Slippage in, slippage out, etc.)
But by far the most important, the easiest, and the most motivating thing to look for is…
Missing the big winning trades.
If you’re missing them, you should drop everything else you’re doing and figure out why.
Because at that point, it’s the most important thing you can work on (and it’s not even close).
-Dave
