Why is it that my forex trading strategy works when i backtest but not when im live?


Forex trading is a popular investment option for traders who want to maximize their profits by buying and selling currencies. However, many traders often experience a common problem – their trading strategy works when they backtest but not when they go live. This can be a frustrating and confusing experience for traders who have spent countless hours developing and testing their strategies. In this article, we will explore the reasons why this happens and provide tips to help traders overcome this problem.

1. Backtesting vs. Live Trading

Backtesting is a process that involves simulating trades using historical data to see how a trading strategy would have performed in the past. This is a useful tool for traders to test their strategies and make adjustments before going live. However, it is important to note that backtesting is not a perfect process. The results may not accurately reflect how the strategy will perform in real-time trading conditions.


Live trading, on the other hand, involves trading in the current market conditions. This means that there are real-time factors such as slippage, spreads, and market volatility that can affect the performance of a trading strategy.

2. Emotions

One of the main reasons why a trading strategy may work during backtesting but not in live trading is due to emotions. Backtesting is a purely analytical process, where emotions are not a factor. However, in real-time trading, emotions can play a significant role in a trader’s decision-making process.

For example, a trader may panic and exit a trade prematurely due to fear of losing money. Or, a trader may become overconfident and take on too much risk, leading to losses. These emotional reactions can cause traders to deviate from their trading plan and make hasty decisions that can negatively impact their results.

3. Market Conditions

Another reason why a trading strategy may not work in live trading is due to changes in market conditions. The forex market is constantly changing, and what worked in the past may not work in the present. Backtesting only provides historical data, and it cannot predict future market conditions.

For example, a trading strategy that worked during a low volatility period may not work during a high volatility period. Or, a strategy that worked well during a trending market may not work during a sideways market. It is essential for traders to monitor market conditions and adjust their strategies accordingly.

4. Execution

Execution is a critical factor in the success of a trading strategy. Even if a strategy seems to be profitable during backtesting, execution issues can arise during live trading. For example, a trader may experience slippage or delay in execution due to poor internet connection or broker issues.

These execution issues can lead to missed opportunities and losses. It is important for traders to choose a reliable broker with fast execution speeds and to monitor their internet connection to ensure smooth execution.

5. Over-optimization

Over-optimization is another factor that can cause a trading strategy to work during backtesting but not in live trading. Over-optimization occurs when a trader adjusts their strategy to fit historical data too closely, resulting in a strategy that is not adaptable to changing market conditions.

For example, a trader may optimize their strategy to fit a particular currency pair or time frame, resulting in a strategy that is not effective in different market conditions. It is important for traders to avoid over-optimizing their strategies and to ensure that their strategies are adaptable to different market conditions.


In conclusion, it is common for traders to experience a discrepancy between their backtesting results and live trading results. This can be due to emotions, changes in market conditions, execution issues, or over-optimization. Traders can overcome this problem by monitoring their emotions, staying up to date with market conditions, choosing a reliable broker, and avoiding over-optimization. By doing so, traders can improve their chances of success in the forex market.