Paper: arXiv 2610.21846
Authors: Alex Vidovich, Zivana Zerjal
Abstract
Backtests of intraday strategies can drift away from what the live system actually does; in our case, the drift never showed in summary statistics. We report six defects found while running one intraday US equity system live and comparing its live days with their backtest replay. Three came from data: a default feed that carried a small fraction of real opening volume, historical prices adjusted for dividends that live orders never see, and data the live system downloaded but the backtest never did. Two came from code: a sizing step that exceeded a limit the live account enforces, and UTC timestamps read as New York time. One came from configuration: settings that were switched on but never reached the code that places orders. For each we give the symptom, the size of the error, the cause and the test or control that now guards against it. All six sat where two paths that should agree had drifted apart. We close with a ten-point checklist. We make no claim about whether the system is profitable.
Complexity vs Empirical Score
- Math Complexity: 2.0/10
- Empirical Rigor: 8.0/10
- Quadrant: Street Traders — practical and empirical, lighter on theory
Why this score: This paper offers a highly practical and novel perspective on backtest-live divergence, focusing on implementation defects rather than statistical overfitting. Its empirical rigor is high due to detailed defect analysis and proposed solutions, while mathematical complexity is intentionally low, making it accessible and directly applicable to practitioners.
Research Flowchart
flowchart TD
A[Research Goal: Understand divergence between backtest and live trading] --> B{Methodology: Compare live system vs. backtest replay};
B --> C{Inputs: Live Intraday US Equity System & Backtest Data};
C --> D[Process: Identify and Analyze Discrepancies];
D --> E[Outcomes: Six Defects Identified (Data, Code, Configuration Issues)];
E --> F[Conclusion: 10-Point Checklist to Prevent Divergence];