Crypto Bot Backtesting: Modeling Slippage, Latency and Failed Orders
How to stop backtests from overstating returns by modeling execution constraints and missing fills.
How to stop backtests from overstating returns by modeling execution constraints and missing fills.
Use decision-time data
Join only information available at the simulated timestamp. Later database updates create look-ahead bias.
Execution model
Replay book depth, queue position, latency, partial fills, fees, gas and rejected transactions.
Failure scenarios
Include stale feeds, provider outages, block reorgs and one-leg arbitrage failures.
Validation
Use walk-forward periods, paper trading and restricted canaries. Compare predicted versus realized slippage.
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