Trading deployment guide

Paper trading vs live trading: know what each stage can prove

Use backtests for historical logic, paper trading for operational rehearsal, and live trading only after a separate review of broker permissions, execution risk, monitoring, and capital exposure.

BotSpot capabilities

Research by conversation

Ask the agent to investigate markets, companies, filings, strategies, and your connected account context.

Place approved direct trades

When direct trading is enabled, request a one-time trade in plain English, inspect the order, and approve it before submission.

Build complete algorithms

Create, revise, backtest, connect, and operate Lumibot strategies without assembling the full application stack yourself.

Use the AI client you prefer

Work in BotSpot or connect through ChatGPT, Claude, Cursor, Codex, and other compatible MCP clients.

1. Separate three different tests

Backtesting, paper trading, and live trading answer different questions. Treating them as interchangeable hides evidence gaps.

  • Backtesting asks how coded rules behaved against historical data under a simulation model.
  • Paper trading asks whether the strategy operates against current data and a simulated account workflow.
  • Live trading exposes real capital to broker, exchange, liquidity, latency, fee, and market-impact conditions.

2. Use paper trading to test operations

Paper trading can reveal scheduling mistakes, stale state, malformed orders, missing data, authentication problems, and monitoring gaps that historical tests miss.

Observe trade and no-trade periods, reconnects, restarts, rejected actions, and agreement between strategy state and broker state.

3. Know what paper fills cannot reproduce

Paper orders are simulated rather than routed to a live market. Systems may omit or approximate market impact, information leakage, latency slippage, queue position, price improvement, fees, dividends, or available liquidity.

Paper results must remain labeled as simulated, never live performance.

4. Verify connection and account requirements

BotSpot broker modes vary. Some connections support paper and live workflows; others are live-only. Authentication, assets, permissions, market data, fees, order eligibility, and regions also vary.

Read the current BotSpot broker page and official broker documentation before connecting.

  • Confirm broker, asset, and desired mode are listed.
  • Verify account approval for intended products and order types.
  • Check current market-data access and trading-session rules.
  • Disable withdrawal permissions on API keys where applicable.

5. Make live deployment a separate decision

Passing a paper test does not authorize live use. Review code, historical assumptions, paper observations, broker configuration, exposure constraints, and monitoring responsibility first.

Define acceptable exposure, order constraints, escalation steps, and a stop process before deployment.

6. Compare live behavior with paper expectations

After live deployment, compare real order timing, fills, fees, rejections, and position state with backtest and paper assumptions. Investigate differences instead of dismissing them as noise.

Return to paper validation after material changes to logic, broker integration, data, credentials, scheduling, or infrastructure.

Limitations and risk

Paper trading is useful for operational testing, but it does not predict live results. Live behavior can differ because of latency, slippage, liquidity, fees, partial fills, market impact, outages, and changing conditions.

Frequently asked questions

Does successful paper trading mean a bot is safe to run live?

No. Paper trading validates parts of the workflow, but fills and account behavior remain simulated. It cannot prove profitability or live execution quality.

How long should a strategy paper trade before going live?

No fixed duration proves readiness. Testing should cover normal schedule, trade and no-trade conditions, restarts, monitoring, and likely failure paths.

Do paper and live trading use the same broker credentials?

That depends on the broker. Some use separate keys, accounts, or endpoints. Check the current broker page and official documentation.

Sources

Sources verified 2026-08-17.