Incubation, Live Trading and Monitoring (6/8)

How to validate your strategy in the real world, one step at a time

In the last newsletter, we walked through how to properly backtest a strategy, not just to confirm it works, but to actively try to break it and understand its limits.

But once a strategy has survived that phase, you’re still not done. Because passing a backtest doesn’t mean it’s ready to trade.
You haven’t seen it behave in real time. You haven’t watched it run in a noisy market. You haven’t dealt with live execution, delays, spreads, or broken data feeds.

This next phase is where theory becomes practice.

You don’t go straight from research to live trading.
You go through incubation, a quiet but essential period where your strategy proves it can function in the real world, without blowing up or going silent.

Then, if it passes that dress rehearsal, you start trading live, in small size, under watchful eyes.

And finally, you monitor. Constantly. Because no matter how well your strategy is built, markets change. And if you’re not watching, you won’t know when the edge is gone, until it’s too late.

This newsletter is about those three steps:
Incubation. Live execution. Monitoring.
The invisible, unsexy part of trading, but the part that keeps you in the game.

👉 If you want to go deeper into each step of the strategy building process, with real-life projects, ready-to-use templates, and 1:1 mentoring, that’s exactly what the Alpha Quant Program is for.

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1. Incubation: The Dress Rehearsal

Most people skip this part. Once the backtest looks good, they jump straight to trading live, with real money, full size, full exposure.
Big mistake.

Backtesting is controlled. Incubation is reality.
This is where you find out if your strategy can actually function in the wild, with live data, real-time signals, and zero hindsight.

And the goal here isn’t to make money.
It’s to observe.

You’re watching for structure. For consistency. For logic.

• Are the signals showing up when they should?

• Are the trades spaced out like you expected, or are you getting a cluster of noise?

• Do the entries and exits match what you designed, or are they off, messy, delayed?

• What happens when the market is closed, volatile, illiquid, or just weird?

This is the phase where you notice all the small things that never show up in a clean backtest:

• A signal that flips direction every bar

• A model that stops producing outputs when one feature goes missing

• A trade that’s triggered at midnight because the timezone wasn’t handled properly

You’ll also test your infra:

• Is the strategy running without crashing?

• Are the logs useful and timestamped?

• Are you able to track each decision and understand it later?

You don’t need full automation yet.
But you do need clarity. You need to see how your strategy behaves under real-time pressure, even if no trades are placed. That’s what incubation is for.

My tip: If you wouldn’t feel comfortable executing the strategy manually based on the live signals you’re seeing, it’s not ready for automation. Watch first, then trust.

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2. Live Trading: Where Theory Meets Execution

Once your strategy behaves consistently in incubation, it’s tempting to scale up and start trading full size.
But the truth is, paper trading ≠ live trading.
Going live introduces new friction. New risks. And a completely different level of responsibility.

So you don’t go live to make money. You go live to learn, again.

The goal of this phase is simple:
Validate your entire pipeline under real-world pressure, with real orders, real fills, and real consequences.

Start small. Size doesn’t matter here, execution does.

You’re observing:

• Are trades actually being placed?

• Are the fills reasonable?

• Are the slippage and latency within what you expected?

• Are there disconnects between what the strategy said it would do and what the broker actually did?

And beyond the technical side, there’s the human part:

• Can you sit through a drawdown without touching the code?

• Can you trust the system even if it hasn’t traded for two days?

• Can you explain exactly what happened on every trade?

Live trading will expose everything you ignored during backtests and incubation:

• Improper error handling

• API failures at random times

• Unexpected fills due to thin liquidity

• Psychological stress from watching real money move

You don’t fix everything here, you observe.
The point is to see where your system bends, where it breaks, and where it holds.

My tip: If you can’t run your strategy at 1/10th of your intended size without feeling in control, you’re not ready to scale. Build confidence first, capital comes later.

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3. Monitoring: Keeping the Strategy Alive

Just because your strategy is live doesn’t mean your job is done.
In fact, this is where it starts.

Markets evolve. Infrastructure degrades. APIs change. And if you’re not paying attention, your strategy will keep running long after it’s lost its edge, or worse, after it’s stopped working entirely.

Monitoring isn’t optional. It’s what separates real strategies from forgotten scripts.

You’re tracking three things:

1. Signal Integrity

Is your model still producing the same kind of signals?
Are the inputs stable? Any missing features? Any logic drift?
If your volatility filter stops updating or your features get NaNs, you won’t see it unless you’re watching.

2. Execution Health

Are trades being placed and filled as expected?
Are there failed orders, partial fills, API errors, timezone bugs?
Execution errors don’t always crash your system, sometimes they just silently ruin your edge.

3. Performance Deviation

Is live performance tracking your expectations?
If a strategy that backtested at 60% win rate is now at 30%, you need to investigate.
Not panic, investigate.

That’s what monitoring gives you:
a chance to intervene before the damage is permanent.

Set up alerts. Automate logs. Review weekly.
Even five minutes a day is better than ignoring it for weeks.

A single strategy can only take you so far.
The next step is building a portfolio, not just of assets, but of strategies.
We’ll cover that in the next newsletter.

👉 If you want to go deeper into each step of the strategy building process, with real-life projects, ready-to-use templates, and 1:1 mentoring, that’s exactly what the Alpha Quant Program is for.

It’s the full roadmap I use to turn ideas into live strategies.