Backtesting can give really useful insights on how a trading strategy might perform. It helps you invalidate very fast wrong assumptions, test technical indicators in just a few seconds and get analytics on how the strategy would have worked in the market.
If a strategy performs well in backtesting, it gives you the confidence to try it out in live trading. However, it’s important to be aware of the backtesting’s limitations as well. We’re all familiar with the message: “Past performance is no guarantee of future results”. This is true because market conditions can significantly change, so a strategy that was good in the past may not perform well in the future.
Also, you need to make sure that trading fees are included in the backtesting’s results and to understand that during live trading, strategy’s profitability can be affected by slippages and delayed order executions.