I was hoping you might be able to shed some light on the correct way to initially test a strategy in your view.
Would it make sense to take a 4 year historical period as in sample data, optimize to seek out the best parameters during this period, without over-optimizing of course, and then move forward to Walk Forward Optimization?
How do you ensure you aren't over optimizing, is it more of a feel thing rather than exact science?
How would you go about the Walk Foward Optimization in terms of size of data set it's being tested on?
Any fedback highly appreciated as always!
Thanks.
The following user says Thank You to WhatIfGod for this post:
Thanks for the questions. These are complicated questions, way too much to put in a thread post.
A few years ago, I did an Elite member webinar where I discussed a lot of this.
Also, my first book "Building Winning Algorithmic Trading Systems" also covers your questions in much more detail. You probably can find a copy at a library, or maybe online with a free trial at overdrive.com
Sorry I can't give short and sweet answers here. You have asked some great questions!
The following user says Thank You to kevinkdog for this post:
Strategies can and do go out of sync, so you have to be prepared to fix and adjust. Sometimes it is a code issue, sometimes a data issue, sometimes exchange issue, sometimes internet issue, etc. The list is long. One thing algo trading is NOT: it is NOT unattended trading. Even hedge funds, etc have people monitoring positions.
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I had a quick question from your book; for the Euro strategy example, you had allowed yourself one month to develop a strategy based on the defined goals.
I was wondering how much time it took you to come to the final strategy and if you went through other ideas before the final published version?
Thanks for the question, and thanks for reading the book. I developed that strategy more than 5 years ago, so unfortunately I do not have exact numbers for that. I am pretty sure I went through multiple ideas and variations during preliminary testing, but I don't recall what or how much. Trying multiple ideas etc. can be dangerous if done incorrectly, as I describe in the book.
Thanks!
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