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Why Is Transaction Cost Simulation Important in Backtesting?

Simulating transaction costs prevents overestimating a strategy's profitability due to real-world fees and slippage.
Greeks.Live17.11.25

Why Is Transaction Cost Simulation Important in Backtesting?

Transaction cost simulation is crucial because real-world trading incurs fees, commissions, and slippage, which can significantly erode a strategy's profitability. Backtesting without realistic cost modeling can overestimate the strategy's edge, leading to a false positive when deployed live.

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