Validation Ladder

Full Definition

The validation ladder is a 4 stage process to prove a trading method before committing larger capital: 1 Backtest across different market regimes to estimate expectancy and drawdown; 2 Paper trade live data to surface execution friction and rule ambiguity; 3 Trade very small real size to reveal fills slippage and emotional response; 4 Scale only after stable rule adherence and acceptable variance. It lowers early large loss risk and builds trust in the rules.