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Algo Trading 101
Common Algo Trading Mistakes
New algorithmic traders lose money in remarkably predictable ways. Every one of these is avoidable once you know to watch for it.
NoVo Options Trading · 2026
Almost every new algo trader makes the same handful of mistakes. Learn them here instead of paying tuition for each.
1. Overfitting the backtest
Tuning a strategy until it looks perfect on history means you've fit the noise, not the signal — and it dies live. A too-good backtest is a warning, not a green light (overfitting, look-ahead bias).
2. Ignoring costs
Slippage, spreads, and fees turn many “profitable” strategies into losers once real fills are counted. Always test with realistic costs (slippage).
3. Oversizing
The fastest account-killer. A good edge sized too big is a blown account waiting for a normal losing streak (position sizing, risk of ruin).
Nobody blows up because their strategy was slightly wrong. They blow up because it was slightly wrong and sized far too big.
4-5. No fail-safes, and blind trust
No fail-safes: a bot with no kill switch will happily trade on a stale feed or a bug (kill switches). Blind trust: “set and forget” until a bad day — automation frees your attention, it doesn't eliminate the need for it. Start tiny, monitor, and scale only on earned trust (how to start).
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NoVo is a software tool for market analysis and for executing trades you initiate, not financial advice. This article is general education, not investment advice. Options trading involves substantial risk of loss, up to and including your entire capital. NoVo makes no guarantee of profit, win rate, or performance, and past results do not predict future outcomes. You are responsible for your own broker account, configuration, and trading decisions.