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The 5 Backtesting Mistakes That Keep Traders Losing Money

Most traders fail not because of their ideas but because their backtesting is broken.
Our upcoming HTA Strategy Lab fixes this. Be the first to access it.

If your backtests look amazing, but your live trading results tell a different story you’re not alone.

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The Top 5 Mistakes

1️⃣ Overfitting to Past Data

Tweaking until a strategy looks perfect but it only memorizes history, not real market behavior going forward.

2️⃣ Ignoring Slippage & Commissions

Backtests assume perfect fills and zero costs, but in live markets, fees and slippage kill “perfect systems.” Mistakes/bad fills will happen in real market environments.

3️⃣ Using Bad or Insufficient Data

Testing only a short time period creates false confidence. Real strategies must survive multiple market cycles. The longer the testing period, the better. Data, data, data!

4️⃣ Cherry-Picking Trades

Skipping losses or testing only in bull runs leads to equity curves that collapse when conditions change. Markets can change on a whim, will your strategy react fast enough?

5️⃣ Not Stress-Testing

If you don’t run Monte Carlo, walk-forward, or prop firm-style tests, you don’t know if your system can survive.

The stats

The numbers don’t lie. Most retail traders lose—and bad backtesting is a big reason.

Day traders often suffer severe losses in their first months—and many never reach profitability, warns the U.S. SEC.
Individual (self-directed) investors underperform active traders the most largely due to costs and behavior, per landmark research by Barber & Odean. (Haas Faculty, ScienceDirect)
Prop firm reality check: independent industry roundups suggest only ~5–10% pass evaluations, and ~1% end up with a payout. (Finance Magnates, QuantVPS)

HTA Strategy Lab helps traders overcome that currently holds them back

Submit trade idea

Have a trade idea but need to validate it to put it in the markets? We help you build a strategy that fits you as a trader.

Backtest the idea

We will provide a full dataset and backtest of the current strategy on one timeframe and instrument.

Get coaching

Jump on a one-on-one call to get an overview of your system and find ways to optimize and implement with our coaches.

No more guesswork. Just clarity. Just confidence.

Meet the team at Hawai'i Trading Academy

Reid and Glenn have collectively been trading for over 20 years and are passionate with helping traders in their journey. Born and raised on Oahu, their goal is to cultivate consistent and profitable traders here in Hawai'i.

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Get our free PDF: "The 5 mistakes Traders Make when backtesting".

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