The close of one bar and the open of the next are not the same price

[Fairman]

The close of one bar and the open of the next are not the same price

In theory, a bar closes at the last tick of the minute and the next bar opens at the first tick of the following one. In a liquid market the two are almost identical. In a fast or thin market, they can be pips apart.

That jump is invisible on the chart, which draws the bars side by side. It means that a signal at the close of a bar and an order sent immediately will fill at a price somewhere near the next open, not the close.

Backtests that enter at the close price assume the trade fills at a price that no longer exists. A more realistic test enters at the next bar's open or at the first tick after the signal.

For scalpers, the difference can be large, especially at news and session opens. In some strategies, simply moving entry from the close to the next open reduces the profit factor sharply.

A simple measurement: for each signal, record the close of the signal bar and the first fill price. The average gap, split by time of day, is a direct estimate of the cost hidden in the backtest.

Is the entry price in the backtest taken from the bar close or the next open?