How important is dry-run?

I have to start by stating the usual disclaimer, that all things written in this post is my personal opinion. I’m not saying they are the only truth and other opinions are wrong. I’ll try to explain the reasons, but in the end, you need to make the decision yourself.

Personally, I don’t run the bot/strategy in dry-run mode to test whether it’s profitable or not. The main reasons why I would do dry-run are

To know how Freqtrade and/or the strategy works

This is an important point, especially for new users. Before you put real money on the bot, it’s extremely important for you to know how Freqtrade and/or the strategy works. Don’t assume things. You need to know exactly how the bot works, and whether it’s suitable for you or not.
One common mistake new users make is immediately run the bot in live trading mode, assume things on how it works, then get confused when the bot don’t work as how they assume.

Make sure your strategy do what it’s supposed to do

This is important especially when you use at least one of the custom functions or adjust_trade_position. For example, when you use custom_exit, it’s important to know that the real behavior match what you intended.
Wrong implementation can make you lose money unwillingly.

Make sure the dry-run result closely match backtest result

As shown here, backtesting simplify some things to make the process fast enough while still trying to make the process close to live process. It’s important to know whether your backtest closely match the dry-run result, because if it does, in my opinion, you can skip the dry-run part when you work on the next updates of that particular strategy. If a backtest with long timerange shows that your strategy is profitable and have good performance, then the strategy (in my opinion) ready to go on live trading.

But wait….

Is it okay to skip dry-run?

Personally, I don’t see any reason to still do dry-run if we have concluded that the backtest of that strategy is close enough to dry-run. If the backtest shows good performance, what else would dry-run can add?
We all know the famous saying past is never future. Yes, good backtest result won’t guarantee profitable live result, but neither do dry-run. You can run the strategy in dry-run for months, but it still won’t guarantee you that once you turn the bot to live mode, the market will stay the same and you will continue the profit journey.
Personally I have seen cases where my strategies can do well for 3-5 months, before it went south. The market is so volatile and unpredictable that no amount of dry-run period can guarantee you any profit. The important thing to get out of dry-run is to make sure the result closely match backtest, then you can have better confidence during strategy development, because you know at the very least, your strategy works well on past data.

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