Tag Archives: curve-fitting

Avoiding Curve-fitting

Can curve-fitting be avoided and how? Here are some thoughts because this is a very important issue in trading algo development.

Posted in Quantitative trading | Tagged , , | Leave a comment

Curve-fitting and Optimization

The subject of optimization and curve-fitting has received a lot of attention by trading system developers, especially during the last 10 years. There is a lot of confusion about this subject and different views, some even conflicting.

Posted in Trading Strategies | Tagged , , | Comments Off on Curve-fitting and Optimization

Backtesting Robustness Index

In this post I introduce the general form of the Backtesting Robustness Index (BRI) I have developed and I give an example of its application to price patterns. This robustness index provides just another way of dealing with the notorious problems … Continue reading

Posted in Trading Strategies | Tagged , , , | Comments Off on Backtesting Robustness Index

There is no Evidence that Counter-Trend Trading is Viable

Trend-following is a very popular trading method employed by funds, longer-term investors and even mechanical and discretionary traders. This method of trading is compatible with common sense and its success has been verified in practice by multi-year performance records showing exceptional … Continue reading

Posted in Trading Strategies | Tagged , , , , | Comments Off on There is no Evidence that Counter-Trend Trading is Viable

Fooled by Multiple Comparisons When Developing Systems For Single Securities or Portfolios

The idea that systems developed on historical data of a portfolio of securities have better chance of being non-random as compared to systems that are developed for a single security is based on the assumption that the size of the rule set used in the data-mining … Continue reading

Posted in Trading Strategies | Tagged , , , , | Comments Off on Fooled by Multiple Comparisons When Developing Systems For Single Securities or Portfolios

Fooled by Randomness, Over-fitting And Selection Bias

There are software programs that allow combining technical indicators with exit conditions for the purpose of designing trading strategies that fulfill desired performance criteria and risk/reward objectives. Due to data-mining bias it is very difficult to differentiate the random strategies from those that … Continue reading

Posted in Trading Strategies | Tagged , , , , | Comments Off on Fooled by Randomness, Over-fitting And Selection Bias