A number of years ago a friend and myself worked out what could best be described as a medium frequency trading strategy based on historical trading data. This

A number of years ago a friend and myself worked out what could best be described as a medium frequency trading strategy based on historical trading data. This was when high frequency trading was still in its infancy. The algorithm would find certain stocks with a high frequency of highs and lows. In simulation, it worked perfectly. We were making loads of "virtual money." This got us excited enough to unleash the algorithm on the world. Guess what the problem was? All the testing in the world can't account for the market dynamics your algorithm itself creates. That was our biggest downfall. Time and time again it worked in simulation but in the real world, its trading actions based on historical data was in fact impacting the market in unexpected ways that we were ultimately unable to account for.