Adding commissions and slippage to the backtest properly
Posted: Sat Oct 31, 2026 8:55 pm
Many backtests report gross results, and the net figure shows up only in live trading. The gap can be disappointing.
A proper test deducts spread at entry and exit using realistic values, adds the commission per lot, and applies slippage based on measured data. It should do so for every trade, not as a final adjustment to the total.
Applying costs per trade matters because they interact with the strategy's logic. A system that holds for short durations and trades often pays far more than one that trades less.
A clean method is running three versions: gross with no costs, net with expected costs, and net with costs increased by 50 percent. If the third version is still positive, there is a margin.
Keep the cost assumptions documented, so later comparisons are fair. A change in broker or account type should trigger a re-run.
The exercise is dull and often discouraging, but it prevents the more discouraging experience of finding out live.
What cost assumptions go into your tests, and how much did they reduce the result?
A proper test deducts spread at entry and exit using realistic values, adds the commission per lot, and applies slippage based on measured data. It should do so for every trade, not as a final adjustment to the total.
Applying costs per trade matters because they interact with the strategy's logic. A system that holds for short durations and trades often pays far more than one that trades less.
A clean method is running three versions: gross with no costs, net with expected costs, and net with costs increased by 50 percent. If the third version is still positive, there is a margin.
Keep the cost assumptions documented, so later comparisons are fair. A change in broker or account type should trigger a re-run.
The exercise is dull and often discouraging, but it prevents the more discouraging experience of finding out live.
What cost assumptions go into your tests, and how much did they reduce the result?