Over-Optimization

Jul 15, 2019 | Automated Trading

Over-Optimization

Though not specific to automated trading systems, traders who employ backtesting techniques can create systems that look great on paper and perform terribly in a live market. Over-optimization refers to excessive curve-fitting that produces a trading plan unreliable in live trading. It is possible, for example, to tweak a strategy to achieve exceptional results on the historical data on which it was tested. Traders sometimes incorrectly assume a trading plan should have close to 100% profitable trades or should never experience a drawdown to be a viable plan. As such, parameters can be adjusted to create a “near perfect” plan — that completely fails as soon as it is applied to a live market.

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Robert Fronjian

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Globex Trading Systems (GTS) designs and develops quality fully automated trading algorithms designed for the stock index futures and commodities markets. Mechanical trading systems eliminate all human emotion that is often attributed to the downfall of most discretionary traders. GTS algorithms were created by our team of professional programmers and traders that are highly educated in mathematics and computer programming languages. GTS strives to bring you the most dynamic and robust systems offered to the public. Everyone in the markets are looking for an “edge” here at GTS our mission is to bring you that edge.

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