Comparing Demo and Live Results Honestly

[Fairman]

Comparing Demo and Live Results Honestly

A trader reports demo results over 100 trades: expectancy plus 0.30R, rule-following 97 percent. Then live results over 60 trades: expectancy plus 0.05R, rule-following 85 percent, with average slippage of 0.8 pips on a 25-pip stop.

Quantify the gap. The difference in expectancy is 0.25R per trade.

Is it statistically meaningful? With a standard deviation of 1.5R, the demo standard error is 0.15R, and the live one is 0.19R. The standard error of the difference is the square root of 0.15 squared plus 0.19 squared, which is about 0.24R. The gap of 0.25R is about one standard error, so it could be chance.

Decompose likely causes. Slippage: 0.8 pips on a 25-pip stop is 0.032R per trade, which explains little. Rule-following: the drop from 97 to 85 percent means 12 percent of trades deviated. If deviating trades averaged minus 0.5R versus plus 0.30R for compliant ones, the cost is 12 percent times 0.8R, about 0.10R. Together, slippage and deviations explain roughly 0.13R of the 0.25R.

The rest could be variance, differences in conditions, or live-only effects such as hesitation.

What to do? Do not scale up. Focus on rule-following in the live account, and collect another 60 trades. If rule-following returns to 95 percent and expectancy stays near 0.05R, the demo edge was probably inflated.

Compare like with like: same setups, same sessions, same period if possible.

Exercise: list three reasons your live results might differ from demo, and measure each.