Fees and slippage can change a backtest’s conclusion

The idea in plain English

A strategy’s gross price outcome is not its net result. Trading fees, spread, slippage, funding and other applicable costs can accumulate, especially with frequent turnover. The relevant costs depend on the market and execution assumptions, so a single optimistic percentage may be inadequate.

The distinction that matters

Use conservative scenarios and show how the conclusion changes. Distinguish a charged fee from a modeled execution difference to avoid double counting. Record whether costs apply on entry, exit, notional value or elapsed time. Clear cost accounting matters more than extra decimal places in the return.

A practical example

In an invented example, a strategy gains $50 before costs across many trades. If combined fees and execution effects total $65, its net result is a $15 loss. A gross-profit chart would answer the wrong question about the economic outcome.

Try this without moving money

• List every relevant cost and its calculation basis.
• Apply costs consistently to the strategy and benchmark.
• Run low, central and conservative cost scenarios and compare conclusions.

A mistake to avoid

Do not remove costs because they are uncertain. Uncertainty is a reason for sensitivity analysis, not an excuse to assume zero.

Before you act

Every numerical scenario here is illustrative, not a market quote or forecast. A test can be reproducible and still be wrong about the future. SuperQuant describes a research-only workflow without live order execution. Practice in a paper setting, disclose assumptions, and do not confuse a polished chart with a suitable investment.