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Backtesting & Validation Checklist

Execution Cost Audit Checklist

Execution cost is where backtested edges quietly disappear. This checklist audits the real cost of getting in and out, both for validating a backtest's cost assumptions and for monitoring a live strategy.

12 ITEMSPublished May 26, 2026Live Content
By AI Fin Hub Research · AI Fin Hub Team

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Move item by item and keep your place

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Checklist Sections

Work in focused batches instead of one long wall

Section 1

Phase 1: Cost decomposition

3 items
Use The ToolPlaygrounds

Execution Simulator

Model realistic order fills — square-root market impact, linear temporary impact, latency jitter, partial fills, and queue position. See the real cost.

ToolOpen ->
Use The ToolComparators

Broker API Comparator

Alpaca vs IBKR vs Tradier vs Schwab vs Robinhood — compare auth, rate limits, order types, market data, MCP, and fees before wiring a line of code.

ToolOpen ->

Section 2

Phase 2: Benchmarking

3 items

Section 3

Phase 3: Edge survival

3 items
Use The ToolCalculators

Statistical Arbitrage Capacity Calculator

Maximum strategy AUM from signal half-life, daily volume, slippage, fees, and target Sharpe. Square-root impact closed-form.

ToolOpen ->

Section 4

Phase 4: Execution improvement

3 items

Pro Tips

Small moves that make the checklist easier to finish

Plot the equity curve before and after audited costs. For high-frequency strategies the gap is often the entire result, which is why pre-cost backtests are so seductive and so wrong.
The mean cost lies. A strategy that pays a fair price most days and gets run over occasionally will show a tolerable average and an intolerable tail.
Cost sets a floor on trade frequency. If the expected per-trade return does not clear the round-trip cost, no amount of signal quality will save the strategy.

Try These Tools

Run the numbers next

PlaygroundsCalculator

Order Book Replay Visualizer

Drop a Level-2 CSV and watch the book reconstruct tick by tick. Animated depth bars, best bid/ask, spread over time. Understand microstructure before.

Launch toolOpen ->

Sources & References

Related Content

Keep the topic connected

Backtesting & Validation12 ITEMS

Backtest Hygiene Checklist

Backtest hygiene checklist: point-in-time data, realistic costs, no look-ahead, aligned returns, and a reproducible run before you trust a number.

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Market Microstructure1 FAQS

Slippage

Slippage as the gap between expected and executed price: the components (spread, market impact, latency), and how to model each in a backtest.

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Market Microstructure1 FAQS

Bid-Ask Spread

Bid-ask spread defined: quoted vs effective vs realized spread, why the touch isn't the cost you actually pay, and how to measure each.

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Market Microstructure1 FAQS

Maker-Taker

Maker-taker fee model: makers get a rebate, takers pay. Why the model exists, what it incentivizes, and how to size up real net cost.

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Planning estimates only — not financial, tax, or investment advice.