Trailing Stops and Curve-Fitting in Trading System Development

Posted by Michael Harris on June 17, 2012

Trailing stop can be very useful during real trading but its use during trading system development and especially by programs that automatically design trading systems is highly questionable because of the potential of curve-fitting a price series . . .

curve-fitting system development

Michael Harris

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Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated performance results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Hypothetical trading results are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Trailing Stops and Curve-Fitting in Trading System Development

Michael Harris

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